Life insurance is usually purchased in order to benefit specific people–oftentimes a spouse, child, partner or parent. If you are looking to care for more than one person, it can be difficult to decide who should be listed as the beneficiary of the policy.
Here are some tips on choosing a beneficiary for your life insurance.
List those you want to help
The people you want to benefit from a payout on your life insurance may not necessarily be family members. The beneficiary does not have to be a single person, or any person at all. You can leave the funds to your trust, your estate, or a charity. If you wish to leave the payout on your policy to multiple people, a trust may be the best choice.
Money can have negative implications too
In some cases, receiving a life insurance payout can have some negative implications. For example, if you name a beneficiary who is in deferment on student loans or who collects disability, they could be forced to come out of deferment or could lose some of their disability benefits. If the payout is high enough, this may not matter, but you should consult with the individual before naming them in your policy.
Expect the unexpected
Of course, you expect your beneficiaries to outlive you, but there is no guarantee of this. To help guard against legal troubles, it is a good idea to select a secondary beneficiary.
Coordinate with your will
It is advisable for everyone to have a will. Your will should name the beneficiary of your life insurance policy. Avoid a contested will by making certain that any time you update the beneficiary of your life insurance you do the same in your will.
If you want extra guidance on how to determine who should be the beneficiary of your life insurance policy, speak to your lawyer and/or an experienced insurance broker.
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