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How to choose a life insurance beneficiary is a snap with a little help

Choosing who will receive your life insurance payout is an important step in purchasing a policy, and it isn’t as simple as you might think.

If you're considering buying a life insurance policy, during the process you'll need to determine who will receive the payout should something happen to you.  It may sound like a simple decision, but there are several factors that could affect your choice. The right beneficiary can help ensure that your final wishes will be fulfilled; here's how to make the best possible choice.

What is a beneficiary?

A beneficiary is the person or entity that you designate to receive the cash benefit from your life insurance policy in the event of your death.  A life insurance beneficiary could be a spouse, a child or another loved one, but it could also be a trust, estate or even a non-profit organization.

A beneficiary also doesn't have to be singular. While you can leave your entire policy to one person, you can also designate multiple people to receive portions of your life insurance payout. Your beneficiary can also be conditional, allowing you to elect a primary, secondary and even final recipient. What this means is that if your primary beneficiary is already deceased when you pass away, then a secondary beneficiary would receive the cash benefit. In that same vein, if both the primary and secondary beneficiaries have passed at the time of your death, your final beneficiary would receive payment.

How exactly do you choose each of these beneficiaries and what factors should you consider? There's a lot to reflect upon before you choose your beneficiary, including how exactly you want your cash benefit to be used if something were to happen to you. Here are 5 things to think about:

What to consider when choosing your beneficiary?

  1. The rules in your state. Depending on what state you live in, you may be subject to different rules and regulations regarding who you can, and cannot, designate as a life insurance beneficiary. For example, in a community property state, a spouse may be able to claim a cash benefit regardless of who is named on a policy. It's important to know these regulations and if they apply to you.*
  2. Know who you want to help. If choosing your beneficiary isn't a snap decision, consider who it is that you want to help. While you may be buying your life insurance policy to help protect your spouse and children, you may also want to pay off student debt or help your self owned business survive your loss. It's important to know why you're purchasing life insurance as you choose one or more beneficiaries.
  3. Who will be last in line? It may be a good idea to determine a first, second and third beneficiary to receive your cash benefit. You may want to elect a trust or charity as your final beneficiary given that the lifespan of an entity can be longer.
  4. Different policies for minors. It's important, if you've designated a minor as your beneficiary; to make sure the minor is not only designated to receive your life insurance payout in the policy, but also in your will. The reason for this is that often the court will decide who receives your payout, and a judge will likely use your will as a reference.
  5. Can my beneficiary live in another country? In most cases, the answer is Yes. As long as the insured meets residency requirements, foreign nationals and non- U.S. residents may be designated as your beneficiary. If this is a concern, we recommend confirming with your life insurance agent when you apply for your policy.

Can I change my beneficiary?

With many life insurance policies, you can change your life insurance beneficiary at any time. Review your policy often (at least once a year) and examine your circumstances. Have you married or divorced? Had another child? Has someone passed away? These could all be factors that would change your beneficiary.

You want your life insurance payout to land in the right hands, and we're here to help. To start your application, contact one of our licensed agents by calling 800-294-4544.



* http://www.insure.com/life-insurance/spouse-right-to-life-insurance-money.html

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