Life insurance is a way to continue to protect and provide for your loved ones when you're gone. When you sign up for your policy, your insurance agent will ask you to designate a beneficiary. This is the person, people, or entity that will receive the funds in the case of your passing. If you're not sure who to choose, consider the following.
How to Choose Your Life Insurance Beneficiary
1. Consider Options
The beneficiary doesn't necessarily have to be one individual. Insurance companies understand that everyone's situation is unique, so they provide numerous options. You can choose one or multiple people and outline how the benefit is split between them.
You may pay the policy out to your estate or to the trustee of a trust that you have already set up. You may also choose a charity or non-profit organization that is important to you.
2. Lay Out Your Goals
Many people take out the policy with the goal of providing for their family, so they name a spouse, partner, or children as their beneficiaries. Others want their business to continue in strength after they're gone, so they name their business partner or establish a trust for the business. Consider who or what financially relies on you, and name them to ensure they'll have what they need.
3. Special Considerations for Minors
Minors have significant limitations when it comes to proceeds from life insurance; in many states, they cannot receive any money, while in others they can only receive up to a certain amount. If you'd like to leave money to minors, such as your children, choose an adult you trust to manage their money or set up a trust in their name and appoint a trustee. Include specific instructions for how the money will be provided to the minor.
4. Align With Your Will
Your insurance policy should match your will. If you update your will at some point, for example, your insurance will not automatically be updated. If it is not updated, the policy will pay out as you originally decided, even if your will states otherwise. You can always make changes to your policy to reflect your wishes.
5. Choose a Backup
It is impossible to know what the future might hold. If you have chosen a person as your beneficiary, include a backup in case something happens to them before your policy pays out. If you have to select multiple beneficiaries, include a backup plan for how the money will be divided if any of the people pass away before the policy pays out or refuse the proceeds.
The right agent will guide you through setting up your life insurance policy with confidence. Larry S. Helms & Associates Insurance Services is an independent agency providing high-quality products and dedicated customer service in Indian Trail, NC. They make all your insurance needs easy by providing it all in one place, from auto to homeowners insurance. Get started with a quote on their website or at (704) 893-2793.