Unless the policy reserves to the insured the power to change the beneficiary at will, such beneficiary is held to have acquired a vested right in the policy immediately upon its issuance, although he or she may not even have knowledge of its existence. This vested right is so complete that neither the insured nor his creditors can impair the same without the beneficiary's consent. This general principle of law is well stated by the Supreme Court of the United States in the following words: 1
We think it cannot be doubted that in the instance of contracts of insurance with a wife or children, or both, upon their insurable interest in the life of the husband or father, the latter, while they are living, can exercise no power of disposition over the same without their consent; nor has he any interest therein of which lie can avail himself, nor upon his death have his personal representatives or his creditors any interest in the proceeds of such contracts, which belong to the beneficiaries to whom they are payable. It is indeed the general rule that a policy, and the money to become due under it, belong, the moment it is issued, to the person or persons named in it as beneficiary or beneficiaries, and that there is no power in the person procuring the insurance by any act of his, by deed or by will, to transfer to any other person the interest of the person named.
It may be added, of course, that the beneficiary's vested right is a contingent one in so far that the payment of the proceeds depends upon the maturity of the contract and the observance by the insured of all warranties and policy provisions.
The wisdom of the foregoing rule cannot be questioned. Many court decisions take the view that when a beneficiary has been gratuitously designated by the insured the policy partakes of the nature of a voluntary trust or gift to the payee, and that the probable intent of the donor should be enforced so long as the beneficiary is not guilty of intentionally causing the death of the insured. But even more fundamental is the plain duty of every person, if financially able to do so, to use life insurance as a means to protect wife and children and other dependents of the household against the want and discomfort that may result from premature death. In making such provision for his dependents, it is certainly probable that the insured intended to safeguard the interest of those named in his policy as beneficiaries against the claims of his possible future creditors. In fact, the United States Supreme Court, in the decision already referred to, also held that: "A married man may rightfully devote a moderate portion of his earnings to insure his life, and thus make reasonable provision for his family after his decease, without being thereby held to intend to delay, or defraud, his creditors, provided no such fraudulent intent is shown to exist or must be necessarily inferred from the surrounding circumstances." There is also much to support the view that the courts in adopting the rule above stated have been influenced by the numerous statutes which have been adopted for the protection of the interest of a married woman and her children in the proceeds of her "husband's life insurance against
the claims of his creditors. At a recent date thirty-five states had enacted laws to this effect; 2 while thirty-one states had laws protecting the proceeds of a policy taken out by a married woman on the life of her husband in favor of herself and children against the claims of her husband's creditors or representatives. 3
Footnote 1. Central Bank v. Hume, 128 U. S. 195. The principle of law defined in this case has' been disapproved by the courts of England and Wisconsin. The Wisconsin court, in a notable exception (estate of Breitung, 78 Wis. 33), held that "one who has procured a policy of insurance upon his own life for the benefit of another, and has paid the premiums thereon as they become due, may dispose of the insurance money by will to the exclusion of the beneficiary named in the policy, during the lifetime of such beneficiary."
Footnote 2. The New York statute, which is used as a specimen, provides that: "The money or other benefit, charity, relief or aid paid or to be paid, provided or rendered by any such corporation, association or society shall not be liable to be. seized, taken or appropriated by any legal or equitable process, to pay any debt or liability of a member or any debt or liability of the widow of a deceased member of such corporation designated as the beneficiary thereof, which was incurred before such money was paid to her or such benefit, charity, relief or aid was provided or rendered."
Footnote 3. In this respect the law of New York is here quoted as a specimen. It provides that: "A married woman may, in her own name, or in the name of a third person, with his consent, as her trustee, cause the life of her husband to be insured for a definite period, or for the term of his natural life. Where a married woman survives such period or term she is entitled to receive the insurance money, payable by the terms of the policy, as her separate property, and free from any claim of a creditor or representative of her husband, except that where the premium actually paid annually out of her husband's property exceeds five hundred dollars, that portion of the insurance money which is purchased by excess of premium above five hundred dollars, is primarily liable (for the husband's debts. The policy may provide that the insurance, if the married woman dies before it becomes due and without disposing of it, shall be paid to her husband or to his, her or their children, or to be for the use of one or more of those persons; and it may designate one or more trustees for a child or children to receive and manage such money until such child or children attain full age. The married woman may dispose of such policy by will or written acknowledged assignment to take effect on her death, if she dies thereafter leaving no descendant surviving. After the will or the assignment takes effect, the legatee or assignee takes such policy absolutely.
"A policy of insurance on the life of any person for the benefit of a married woman, is also assignable and may be surrendered to the company issuing the same, by her, or her legal representative, with the written consent of the assured".