Things To Consider When Naming Life Insurance Beneficiaries

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Out of all the things that you must do when obtaining life insurance, naming your life insurance beneficiaries is one of the most important. Choosing your life insurance beneficiaries carefully can help you protect your loved ones after your death while averting issues down the road. Unfortunately, when it comes to your beneficiaries, there are a lot of things you can do wrong. The experts at InsureChance has a number of tips that can help you when it comes to naming life insurance beneficiaries.

Many people make the mistake of not naming any beneficiaries when filling out the paperwork for their life insurance policy. This may be because they feel that the funds will be paid out to the person with the strongest claim when they pass away and not naming someone now means they will not have to change the paperwork in the future. However, if a beneficiary is not designated, the proceeds from the policy will pass on to your estate and will go through probate, which can be a lengthy, costly affair.

This would put an undue hardship on your spouse or children that could have been avoided by naming them as the beneficiary of your life insurance policy. It may also provide an opportunity for creditors to go after the insurance payout, which they can only do if the payout ends up in your estate. To prevent these issues, explicitly name a beneficiary for your life insurance policy, even if you assume that they would end up with the money anyway.

You should also consider naming more than one person as the beneficiary for your life insurance policy. If you only name your spouse as your beneficiary, it can become a problem if they expire before you do or if you both die at the same time, such as in an accident. The solution is to name a secondary, or even a tertiary beneficiary, for your insurance policy. Because they are lower on the list of beneficiaries, they will not share in the payout of the policy unless the primary beneficiary is no longer around to collect.

There are also things to consider if you want to name your children as your life insurance beneficiaries. Minor children can’t receive policy proceeds the same way an adult would, so you might need to set up a trust or name a custodian who could administer the assets. However, it is important to remember that if you live in a state with community-property laws and you do not want to name your spouse as your primary beneficiary, you cannot do it without his or her blessing. If you divorce or become widowed, revisit your policy and think through your beneficiaries again to make sure you are making the best decision for the current situation.

One Response to “Things To Consider When Naming Life Insurance Beneficiaries”

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  1. It’s interesting how so many people overlook estate related issues – like life insurance, wills, etc. I guess this is because it is not fun to think about our own demise. But, you have to think about the others in your life. They will be going through a tough time having just lost you and you shouldn’t leave it up to them to decide on how your belongings should be split up or even ignore it and allow a third party to make the decision for everyone. Naming beneficiaries is a quick process that should never be overlooked.

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