If you have a furry family member, you may consider adding them to your life insurance policy. However, as much as you love your four-legged companion, you unfortunately can’t add them as a life insurance beneficiary. Luckily, there are other steps you can take to ensure your pet will be taken care of if you pass away. Let’s walk through the reasons why pets aren’t eligible as beneficiaries for life insurance benefits and other ways you can protect them.
What is a death benefit?
Sometimes referred to as the face amount of a policy, the life insurance death benefit is the amount a policy will pay its beneficiaries in the event of the insured’s death. There are several different ways in which your beneficiaries can receive the death benefit during the life insurance payout process; the most common are lump sum payments, installments and annuities, and retained asset accounts. It’s important to ensure your beneficiary information is kept up to date to ensure your death benefit is paid out appropriately.
Why You Can’t Name Your Pet as Your Life Insurance Beneficiary
While you love your pet like family, you can’t designate them as a life insurance beneficiary because they’re unable to participate in the basic steps of being named beneficiary, such as signing documents and filing a claim. Pets also lack the legal capacity to receive and manage funds or property, which are essential functions of a beneficiary. However, there are still several steps you can take to ensure your beloved pet is taken care of if you pass away.
How to Make Sure Your Pet is Still Cared For After You’re Gone
Your pet is an important part of your family, and it makes sense to want confirmation that they’ll be cared for after you’re gone. While it isn’t possible to name your pet as a life insurance beneficiary, there are other ways for your pet to benefit from your life insurance policy. Here are just some of the options available for pet owners to offer security and peace of mind.
Name Your Pet’s Caretaker as Your Beneficiary
If you have someone who would already be taking care of your pet if anything were to happen to you, then naming them as a beneficiary is an easy way to make sure your pet is taken care of after you’re gone. The caretaker will need money for food, veterinary care, medicine, and more, and you can designate a certain amount or percentage of the death benefit to go toward these expenses.
Set Up A Trust For Your Pet
Setting up a trust for your pet is another way you can make sure they have the care they need if you pass away. A trust is a legal arrangement that allows a third party, known as a trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts are commonly used to manage and distribute assets, provide for the care of dependents, and establish specific conditions for the distribution of assets. As a legally binding financial plan, a trust allows you to designate a specific amount of money to be used toward your pet’s care.
Consider Your Pet’s Guardian
Whether you have a life insurance trust or want some of your policy’s death benefit to go toward your pet, you’ll have to name an official guardian to accept the funds and take care of your pet after you pass away. Naming a close, trustworthy family member, friend, or other loved one as a guardian will help give you peace of mind that your pet will be left in good hands.
What’s the difference between pet trusts and a life insurance death benefit?
The primary purpose of a trust is to manage and distribute assets to provide for the care of dependents, while a life insurance death benefit is the sum of money paid to the designated beneficiaries upon the death of the insured individual. The purpose of a life insurance death benefit is to provide financial security to your beneficiaries by replacing your income, paying off debts, covering funeral expenses, or fulfilling other financial obligations. A trust allows you to name a minor or a pet as a beneficiary, while a life insurance policy does not.
What Else to Know About Choosing a Life Insurance Beneficiary
Choosing a beneficiary for your life insurance policy is likely one of the main reasons you bought your policy in the first place. There’s a lot to consider when selecting a beneficiary, including who can be a beneficiary, the ways in which they can receive the death benefit, tax implications, and whether you want to have a contingent beneficiary. Make sure you’re thoroughly considering all of these options when deciding not only who is the right beneficiary, but who will take care of your furry family member if you’re unable to do so.
SelectQuote Can Answer Your Life Insurance Beneficiary Questions
Life insurance helps provide security and peace of mind that your loved ones will be cared for after you pass away. Selecting a beneficiary can often bring up many questions, but we’re here to help. At SelectQuote, we have nearly 40 years of experience helping people make decisions about life insurance. We’ll answer any questions you have about selecting a beneficiary, guiding you through your options so you can feel confident in your decisions.
