Leaving something behind for your family when you pass away is something we all want to do to protect the financial futures of those that matter most. For this reason, your beneficiary is one of the most critical factors of your life insurance plan.
But how should you go about choosing your beneficiary? As simple as the decision seems to be, it actually can be more complicated than it sounds.
The process of naming a beneficiary requires a lot of consideration, and often there are some important aspects of choosing a recipient that people don't realize. Life and other circumstances can get in the way of making a decision, so we've gathered some helpful tips to make the process easier for you.
It's normal to leave an insurance benefit to a family member like a son, daughter, or spouse, but other choices are available to someone purchasing coverage. If you have children or grandchildren that are currently in school or have a home and family of their own, making them your beneficiary is most likely going to be your ideal choice. After all, protecting your loved ones and providing for them when you are gone is generally the primary purpose of buying life insurance.
But what if your family's taken care of already? In this case, making your beneficiary a local charity or hospital is an excellent option to consider if you are interested in leaving behind a legacy or want to support an organization that is close to your heart.
Check with a licensed professional insurance advisor to clear up any concerns you may have about beneficiaries. Insurance professionals help make these important decisions by asking you the vital questions that will guide you to make the best decision for you and your loved ones.
Settling on your beneficiary when purchasing your policy is not the end of the process. Anything can happen throughout your life, so it is imperative to look through your policy and update your beneficiaries if need be.
Marriages, divorces, having children, and even death are all circumstances people face, including your beneficiaries. These life-changing moments (among many others) are times that you should be considering a change of beneficiaries. Perhaps you are no longer with your spouse, but you have him or her as your beneficiary; in this instance, you should change your beneficiary to your children or another family member.
Always have a secondary beneficiary in place to receive your plan's benefit if your primary choice cannot for any reason.
If your initial beneficiary either refuses the funds or passes away, the benefit will automatically move to your second choice. Without a contingent beneficiary, your plan's benefit goes to your estate, where the funds can be mismanaged.
Continue to review your secondary beneficiary to ensure that the right people are always benefiting from your coverage.
Ensuring that your final wishes properly looked after means checking that your insurance policy is in line with what's in your will. Designating someone as the recipient of your life insurance plan in your will isn't enough to ensure they get your plan's benefit; the choice must also be in your policy's contract.
Many people often don't understand that your will won't supersede the decision of beneficiaries outlined in your life insurance policy. A life insurance policy is a contract, and what is recorded and signed on that document is enforced. Always ensure that your will and insurance beneficiaries are updated simultaneously to avoid any confusion and errors after you pass away.
Designating a younger child as your beneficiary is a mistake that will leave them unable to receive your plan's benefit. Underage children are not eligible to receive the payout of a life insurance policy, even if selected as the plan's beneficiary.
Setting up a trust will protect the money you are leaving behind, allowing it to go to your child when they reach adulthood. Don't forget to appoint a trustee to overlook the trust and ensure that the money left behind remains in good hands. A trustee can be a family member or friend but remember to talk with the person beforehand to ensure that they are comfortable with the responsibility.
Without a trust, your plan's benefit will likely fall out of your exact wishes as the court will have to appoint someone to manage the funds. The process of assigning a guardian to overlook your plan's benefit can be a lengthy procedure and one that can leave someone you may not have wanted to be in charge of your plan's benefit.
At Insurance Supermarket International, we understand that life's complicated and moves fast. We offer life insurance that is simple and affordable that protects the people you care about first and foremost. We'll help you find a plan that works for your needs, and provide helpful advice on aspects of life insurance like the beneficiary selection.
If you'd like more information or have any questions, feel free to contact us, and we'll be more than happy to assist you with your life insurance needs. If you are looking for a quote for life insurance coverage, our very short free quote form will get you in touch with a licensed representative.
Written by Diane Taes