Choosing Your Life Insurance Beneficiary
Life Insurance Beneficiary Explained.
This sounds simple enough. Naming your beneficiary is simply deciding who is going to receive the “death benefit”. A life insurance beneficiary can be an individual, estate, or an organization. There are some things to consider when making this decision.
You can also assign multiple beneficiaries to your life insurance policy. This is usually done by assigning a percentage of your policy to each beneficiary. Doing so will prevent having to correct the policy each time the policy’s value is adjusted.
There are a few restrictions on life insurance beneficiaries which you should also be aware of. A minor can only be named as a beneficiary if a guardian is assigned to oversee the proceeds and the spending of them until the minor becomes an adult. Check with your State Guide for more information and be sure to ask these questions for your particular insurance policy.
If you want the freedom to change your beneficiary at any time during the policy, be sure to understand the type of beneficiary you are getting. An “irrevocable beneficiary” will require that the current beneficiary consents to changing your policy. If they do not, you will be unable to change your beneficiary. This is called a “revocable beneficiary”. Be sure to ask your life insurance agent about your policy.
You can also name “contingent beneficiaries”. Should the primary beneficiary also die before collecting on the policy, your contingent beneficiaries would then become the primary. This is extremely useful for parents. If you do not name a contingent beneficiary and your primary beneficiary passes away, the death benefit will pass to your estate and are subject to taxes and fees. To avoid taxes and fees on your death benefit, name a relative as the beneficiary. If the beneficiary is, or becomes, your estate, creditors can take the money to pay off your debts.
This sounds simple enough. Naming your beneficiary is simply deciding who is going to receive the “death benefit”. A life insurance beneficiary can be an individual, estate, or an organization. There are some things to consider when making this decision.
You can also assign multiple beneficiaries to your life insurance policy. This is usually done by assigning a percentage of your policy to each beneficiary. Doing so will prevent having to correct the policy each time the policy’s value is adjusted.
There are a few restrictions on life insurance beneficiaries which you should also be aware of. A minor can only be named as a beneficiary if a guardian is assigned to oversee the proceeds and the spending of them until the minor becomes an adult. Check with your State Guide for more information and be sure to ask these questions for your particular insurance policy.
If you want the freedom to change your beneficiary at any time during the policy, be sure to understand the type of beneficiary you are getting. An “irrevocable beneficiary” will require that the current beneficiary consents to changing your policy. If they do not, you will be unable to change your beneficiary. This is called a “revocable beneficiary”. Be sure to ask your life insurance agent about your policy.
You can also name “contingent beneficiaries”. Should the primary beneficiary also die before collecting on the policy, your contingent beneficiaries would then become the primary. This is extremely useful for parents. If you do not name a contingent beneficiary and your primary beneficiary passes away, the death benefit will pass to your estate and are subject to taxes and fees. To avoid taxes and fees on your death benefit, name a relative as the beneficiary. If the beneficiary is, or becomes, your estate, creditors can take the money to pay off your debts.