Life Insurance Beneficiary
Life Insurance Beneficiary
Art Glasgow, Peck-Glasgow Insurance
When discussion life insurance with our clients, we are often asked the question “what is a beneficiary”? This is a very important point to consider when properly planning your life insurance structure and why you should actually purchase life insurance. Failure to name a beneficiary, yields control of the policy benefits to your estate and the trustees decisions may not be the same as your decisions would be.
A beneficiary is the person or entity you name in a life insurance policy to receive the death benefit. You can name:
1.) One person
2.) Two or more people
3.) The trustee of a trust you’ve set up
4.) A charity
5.) Your estate
If you don’t name a beneficiary, the death benefit will be paid to your estate.
Your life insurance policy should have both primary and contingent beneficiaries. The primary beneficiary gets the death benefits if he or she can be found after your death. Contingent beneficiaries get the death benefits if the primary beneficiary can’t be found. If neither beneficiary is found, the policy benefits are awarded to your estate.
Good advise would be to make sure you define or name the beneficiary as closely as possible and include their social security number. This decreases the likelihood of disputes that may arise regarding the death benefits. If you use the term spouse, wife or husband without a specific name, then a former spouse could attempt to make a claim against the benefits. On the other hand, while specific names help to define who the beneficiaries are, you must make sure the document stays up to date. Children born at a later date will not be included in the death benefits if they are not specifically named in the policy beneficiary section.
It is also prudent to make sure you are clear heirs of your beneficiary. Sometimes a beneficiary pre-deceases the policy holder in death. Do you want the other family members to share in the policy proceeds?
So keeping your beneficiary information up to date is very important if you want the policy proceeds to be paid to the people or entity that you prefer. Leaving death benefits to your estate can cause delays as probate proceedings can drag on, and the reduce the benefits actually paid out after the court costs associates with probate.
Review your beneficiary designations as new life situations arise in order to make sure your choice is still appropriate. An annual review with a professional insurance agent can help you with the process. Peck-Glasgow Insurance is a good source for Alabama life insurance policies.