Lets face it – most people dont like to spend more time than necessary thinking about life insurance, so when you filled out your application, you probably listed your spouse or closest relative as beneficiary, signed the forms, and hurried to the office or beach. But while your spouse or closest relatives are logical choices for beneficiaries, they might not be the only people affected if something happens to you. By choosing, adding, and changing beneficiaries based on your life circumstances, youll have peace of mind knowing that your wishes will be fulfilled after you pass.
If something happened to you today, who would be affected financially? This is the question you need to answer when choosing beneficiaries for your life insurance policy. If youre married or have a domestic partner, he or she would not only face the challenge of replacing your income, but would also be saddled with your final expenses, including funeral costs, medical bills, and debts. Naming your partner or spouse as a beneficiary makes good sense. However, if others will be financially burdened by your death, you can add them as co-beneficiaries. For example, if you support an unemployed sibling, care for elderly parents, or provide financial assistance for struggling friends, you might consider adding them as beneficiaries. Term life insurance policies allow you to name as many beneficiaries as you wish and stipulate what percentage of the benefit each person receives. This way, you make your final wishes explicit, instead of putting one primary beneficiary in the uncomfortable position of determining who should receive funds and how much.
Selecting Secondary Beneficiaries
Youve heard the phrase, better safe than sorry, and in the case of term life insurance, it certainly applies. You cant be certain that the person youve designated as the primary beneficiary will be alive to receive the money, so naming a secondary beneficiary is a good way to keep the benefit funds out of court. Choose a person you trust, and make sure to tell him or her if you want the funds to be used for a specific cause, such as caring for children or pets.
Setting up a Trust
A trust is just that – money you can trust will be there, even if youre not. Set up by an attorney and administered by a trustee, a trust is an account that makes regular payments over time to its beneficiaries. This option is a good way to provide for pets, children, or other loved ones who would not be able to manage a large sum of money on their own.
Changing your Beneficiaries
Beneficiaries arent set in stone. In fact, you should review your policy every year to ensure the beneficiary information is correct. If youve added children, grandchildren, or other loved ones to your family, youll need to add them to your policy as well. Additionally, you should remove people whove died, eliminate ex-spouses, and change awarded percentages as your family situation changes. For example, once your children are able to support themselves, you might designate fewer funds to them and more to your grandchildren. If your policy has a large benefit and most of your children can care for themselves, you might consider making a donation to charity by naming one as a co-beneficiary.
It takes time to select, add, and change beneficiaries, but making sure the right people are listed is just as important as getting life insurance in the first place! At SelectQuote, we want you to feel secure. We know that when you feel confident about your beneficiary choices, youll have greater peace of mind.