The process of choosing a life insurance beneficiary is not always as simple as it sounds. While you have the right to do whatever you want, this is not a decision you make on a whim. Instead, you need to consider all your options before making a final choice. Doing so will put your mind in a good place, knowing that your life insurance death benefit will end up in the right place once you pass on.
It goes without saying that some people find it easier to choose a beneficiary than others. You should not worry about everybody else. Instead, you need to focus on what’s best for you and your family now and in the future.
With all this in mind, let’s take a look at a few things you can do to make this process easier:
- Decide who you want to help. You don’t buy life insurance for what it can do for you right now. You buy this because you want to financially support someone else after your death.
For some, a spouse makes the most sense as a beneficiary. For others, a child or children is typically best.
In the end, what matters most is that you make your decision based off of who you want to help.
- Compare your many options. It’s easy to believe that you only have a couple options, but nothing could be further from the truth. For example, many people want you to believe that you have to name your spouse or a child as the beneficiary on a life insurance policy. While these may be the two most common choices, there are others to consider.
For example, did you know that you can name a charity as the beneficiary? This is a great way to give money to your favorite charity upon your death. Sometimes, thinking outside the box is the best thing you can do.
- Don’t forget about the secondary beneficiary. When you choose a life insurance beneficiary, you do so under the assumption that this person will live longer than you. But what happens if this is not the case?
This is why you should name a secondary beneficiary. Also known as a contingent beneficiary, this is the person who receives the benefit in the event that the primary beneficiary has passed on, thus not being able to collect.
- Remember this: you can make a change if necessary. Some people believe that once they choose a beneficiary they have to stick with this decision for the rest of their life. This simply isn’t true.
Did you know that you can change your beneficiary as often as you would like? Take for example a couple that goes through divorce. While you previously listed your spouse as your beneficiary, this may not be in your best interest any longer. This is one of the many situations in which it makes sense to make a change.
- Think about the well being of your children. The last thing you want to do is leave minor children behind, however, you have to plan for anything that could happen. Since a life insurance company will not award a death benefit to a minor, you have to consider your options.
Most commonly, the money will end up in a trust until your minor child or children reaches legal age.
Final tip: your life insurance policy should match your will. It’s a common misconception that you can leave a life insurance death benefit to someone in your will without noting this on the life insurance contract. You are required to make a beneficiary designation in the life insurance contract, regardless of what your will says.
With these tips guiding you, it can be simple to choose the right life insurance beneficiary. This can be a difficult choice, so don’t get too far ahead of yourself. Take your time, compare your options, and only make a decision when you are ready to do so.
If you have yet to download our free report – Dangers of Do-It-Yourself Wills and Living Trusts – now is the time to do so.
Once you read through this, you’ll better understand why you need a professional on your side as you create a will or living trust. Not only can an attorney address these types of details, but a legal professional can also answer all your questions related to life insurance.
- What You Need to Know About SECURE Act 2.0 - March 30, 2023
- Show Your Love by Creating an Estate Plan - March 15, 2023
- What Happens When You Don’t Trust Your Trustee – Part II - March 7, 2023