A Guide to Selecting the Right Beneficiary for Your Life Insurance Policy

Buying a life insurance policy will require you to make some very important decisions. One of the most important is who you will name as your beneficiary. The person you choose must be someone you trust who will follow your instructions. For many people, this is a family member that will benefit from receiving the death benefit. A spouse, child, sibling, or parent are common choices. You may choose to name co-beneficiaries to make sure each person gets their fair share of the payout. Here’s a guide to choosing the appropriate beneficiary for your life insurance policy.

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Know Your Options

You need to understand what your insurance options are properly. If you want to make sure your minor children are properly cared for, you might choose to appoint a trustee or an attorney that will manage your estate. This ensures your spouse and children have what they need when they need it. You can also choose a non-profit charity or other organization that will benefit from your generosity. You may also choose to name your estate as the beneficiary.

The Primary Objective of Your Life Insurance Policy

The purpose of your policy will play a large role in who you choose as a beneficiary. If you want to care for your family, you may choose to name a spouse, sibling, or child as your beneficiary. This will ensure that your family’s needs are taken care of. If your children are grown, you may want to set up a trust to ensure that your spouse has everything they need to live comfortably for the rest of their lives.

Keep Everything Updated

If you have a life insurance policy in place at an early age, the purpose of your policy may change. This means that your choice for a beneficiary may change as well. If you make any changes to your policy, you will want to think about changing your beneficiary as well. Keeping your policy up to date will ensure that your death benefit is used according to your instructions. For example, when you initially purchased the policy, you might have had your parents as the beneficiaries. However, when you get married, you might want to add your spouse and kids as beneficiaries as well.

Be Specific and Detailed

While creating your will or determining who you want to name as your beneficiary, be as detailed as possible. Include any identifiers such as Jr., Sr. III, or any other suffix that will conclusively prove who you are trying to name as your beneficiary. If you aren’t sure of a suffix, ask to verify and then give the information to your insurance agent so they can update your policy. This ensures the right person is named as your beneficiary, and there is less confusion during a very stressful time.

What About a Back-up?

If for some reason, your first choice for a beneficiary is unable to act on your behalf or take care of the financial instructions you have left for them, you will need to come up with a backup plan. Choosing someone who will be able to take care of your family and handle all of the financial details is extremely important. That is why you should always have a primary and a secondary beneficiary listed.