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Beginner’s Guide To Choosing A Beneficiary


If you have a life insurance policy, your beneficiary is the person who will receive the benefits in the event of your death. For obvious reasons, choosing a beneficiary is an important step in the process of obtaining life insurance. If you are new to the process, the following tips can help.

Consider the Purpose of the Policy

You are buying life insurance for a reason. It may be to provide for your family in the event of your death. In that case, the most likely beneficiary is your spouse. You may have poured your heart and soul into a business and want it to continue after you’re gone, in which case your business partner may be the best beneficiary. The proper person to name as your life insurance beneficiary will depend on your purpose for buying the policy.

Look at All Your Options

You are not limited to your spouse or children as beneficiaries on your life insurance policy. You could name a friend, a significant other, a godchild, a charitable organization, a trust, your estate, or more than one person to split the benefits as you decide. However, if you are married and live in a community property state, your spouse will have to waive his or her rights before you can designate another life insurance beneficiary. This is because the nine community property states require equal distribution of assets acquired during a marriage. Our experienced agent will be happy to advise you on your options.

Choose a Secondary Beneficiary

You are buying life insurance to benefit someone else in case something happens to you. But something could happen to your beneficiary as well. For example, husbands and wives sometimes die in the same accident. You name one or more primary beneficiaries of your life insurance policy.

This person or persons will receive death benefits when the insurance company pays out. You should also name one or more secondary beneficiaries in case the primary beneficiaries are deceased, cannot be located, or refuse the insurance proceeds for some reason. Naming secondary beneficiaries give you a backup plan and greater control of where your death benefits go.

Do Not Designate a Minor as Beneficiary

Legally, minor children cannot receive life insurance proceeds directly. If you named a minor child as beneficiary on your life insurance policy, in the event of your death, the court would appoint a legal guardian who would determine how the death benefits would be managed and spent. This may not be in accordance with your wishes. A much better option is to set up a trust for your child, name the trust as the beneficiary, and choose someone you can count on to serve as trustee and manage the funds for your child.

Keep Beneficiaries Up to Date

If you marry or divorce, or if your child reaches adulthood, you may want to change the beneficiaries on your life insurance policy. Most people would not want their life insurance proceeds to go to an ex-spouse simply because of an oversight.

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