Life insurance plays an important role in protecting your loved ones if something happens to you. Therefore, choosing the right beneficiary for your policy is one of the most important processes after securing the coverage. In the world of life insurance, the beneficiary is the one who receives life insurance payout when the insured person dies.
Choosing a beneficiary is crucial as it ensures your money goes exactly where you want it to go. It also lets your loved ones access payouts without having to wait for the will to be executed. Therefore, before naming your beneficiaries, consider why you took the life insurance in the first place.
Most people take life insurance to provide their loved ones a safe haven in the event that something happens to them. Think of your spouse if you are married; they could receive payouts to supplement your income or cover the debts you leave behind. If you are taking care of your parents, the payouts could help them maintain the quality of life they have now.
Determining factors of Life Insurance Beneficiaries
Contingent beneficiaries are the beneficiaries who will receive payouts if the primary beneficiaries are absent. While it is not common for primary beneficiaries to die before you, sometimes it happens. Therefore, ensure you have a contingent beneficiary in place.
How to Choose family beneficiaries
There is no one universal formula for choosing beneficiaries because each family situation is different. Take a moment to think about your family status. How will they be affected by your death? Are they able to cover the funeral expenses? Will they be able to cover outstanding debts? Will they be able to support the household without your income? Consider naming the primary beneficiaries and also contingent beneficiaries.
Rules and laws naming beneficiaries
It is important to understand the rules and laws when naming beneficiaries. For example, if you name a minor to be your beneficiary, they cannot receive the payouts until they become adults. You would want to set up a trust to manage the money until they are grown or appoint them a guardian. It’s best to establish a trust so your kids or grandkids access funds for school and college for the rest of their lives, rather than bombarding them with a large chunk of money they may not be ready to handle before they are financially independent.
Choosing a beneficiary can sometimes be a daunting process. If you are still unsure how you should name your primary and contingent beneficiaries on the contingent contract documents, get in touch with our expert financial advisors at Ascendant Financial today to help you make your decision.
Contact Ascendant Financial today to review all of your options.
