Are you considering getting life insurance? If so, you should think about who the beneficiary of this policy will be. While it might be easy to write anyone’s name down that comes to mind, it’s best to take some time to weigh your options. The person you name as beneficiary will receive most or all proceeds from the policy you sign up for, which means that your decision will have a long-term impact.
If you’re finding it challenging to identify someone to be the beneficiary of your life insurance policy, the following should make it easier for you to decide.
Selecting a Life Insurance Beneficiary
There are generally no rules when it comes to who can be named as a beneficiary for a life insurance policy. In most cases, these beneficiaries will be different from the ones listed in your will, which means that you don’t need to name the same people to your life insurance policy if you don’t want to.
You’ll also find that beneficiaries don’t necessarily need to be people. You can name a business, trust, or charity as the beneficiary of your life insurance policy. The people who can be beneficiaries include children, friends, spouses, or relatives.
While you can basically choose anyone you want to be a beneficiary, one restriction might apply to you if you’re married. If you wish to designate someone other than your spouse as a beneficiary, your spouse will need to waive their rights for you to do so. This restriction is only found in common property states, which include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
You may be in a situation where you have a certain amount of debt and want to name your primary creditor as a beneficiary. Instead, it’s recommended that you name someone as the beneficiary who will pay this debt from the proceeds.
How to Place a Beneficiary on Your Life Insurance Policy
Now that you have a good idea of who you want as your beneficiary, you should place their name on the designation form for the policy. This is a basic legal document that your insurer will use to identify who the benefit will pass to when you die.
Keep in mind that you can have a primary beneficiary and a contingent beneficiary. A primary beneficiary is the first person named in a will or insurance policy to receive benefits. A contingent beneficiary is someone who will receive these benefits if the primary beneficiary is also deceased.
Some of the details you should add when naming the beneficiary include:
- Full name
- Phone number
- Date of birth
Designating a Dependent or Child as Beneficiary
You may be able to choose your child or dependent to be a beneficiary. However, some insurers don’t allow people to name minors as beneficiaries directly. In this case, you could have their legal guardian be the beneficiary or create a trust in your child’s name with the trust being the beneficiary.
The Bottom Line
Deciding who you want to be the beneficiary of your life insurance policy doesn’t need to be a difficult decision. Find someone you know you can trust and who you believe will benefit the most from this money. You could also name a business or charity as a beneficiary if you believe the money will be better used in this regard. Once you determine who your beneficiary will be, all that’s left is to fill out the necessary forms and send them to your insurer.