Choosing a life insurance beneficiary can be confusing, but it’s one of the most important decisions you’ll make in terms of your family’s financial security. The person you select to receive the benefits of your life insurance policy should be someone who will need the money and appreciate what it does for their lives — because if they squander it, you’re not going to get it back! Here are 10 tips to help you choose the right beneficiary, so you can have peace of mind knowing that your beneficiaries will be taken care of after your passing.
1) You can name anyone as your beneficiary
A beneficiary is your choice of person or organization that will receive the proceeds from your life insurance policy. You should make sure that your beneficiary is someone you trust and someone who will be able to benefit from receiving a life insurance payout.
When choosing a beneficiary, there are a few factors you should consider:
*Who will want my money more?
*Who needs it more?
*How much do they need it?
*Do they want it?
*What will they use it for?
2) Consider your family members
-Look at your current life insurance policy and see if there is a beneficiary already in place. -If you have children, choose one of them or a trusted friend or family member as your beneficiary. -If you have elderly parents, choose them as your beneficiary. -If you’re single and without children, make sure to update your beneficiaries every five years or so. -Determine which type of life insurance coverage is best for you: term, whole life, universal life, etc.
3) Consider your financial situation
It’s important to weigh your financial situation and choose a beneficiary accordingly. If you don’t have a spouse or children, you may want to consider naming an individual who will inherit your assets. If you do have children, but they are adults with their own assets, it is important that they know what they are inheriting so it doesn’t cause any conflict.
4) Consider your estate planning
For those of us who want our loved ones taken care of after we’re gone, life insurance is a great way to provide for their financial needs. But it’s important to know that beneficiaries aren’t always as straightforward as they seem. There are many factors that go into choosing the right beneficiary and even though you might think you have your plan in place, it’s wise to revisit it from time-to-time.
5) Consider your life insurance policy type
If you’re trying to decide who should be named as your life insurance beneficiary, think about what type of policy you have. For instance, if you have a life insurance policy that will pay out a lump sum, someone who is in your will would most likely be more appropriate than someone who is not. If you’re unsure of which choice might be best for you and your family, talk with an advisor.
6) Consider your beneficiaries’ ages
When choosing a beneficiary, keep in mind that younger beneficiaries have more time to make use of the life insurance benefits.
If you are single and have children, it might make sense for your children to be your beneficiaries.
If you are married, you might want both spouses on the policy as beneficiaries.
If one spouse is older than the other, then it may be wise for the younger spouse to be on the policy as a beneficiary.
7) Consider your beneficiaries’ health
It is important to think about your beneficiaries’ health when selecting a life insurance beneficiary. If your beneficiaries have any pre-existing conditions, you may not be able to get them coverage. For example, a common pre-existing condition is obesity. The average cost for a person who is 300 pounds or more can be $1,000 per month in premiums.
8) Consider your beneficiaries’ relationship to you
Parents, spouse, children, siblings, friends – we all want to ensure that those who are close to us financially and personally will be taken care of in the event of our death. There are a number of ways you can choose a beneficiary for your life insurance policy:
- Select someone who is entitled or obligated by law or agreement to receive it.
9) Consider your beneficiaries’ tax status
Before you designate a beneficiary on your life insurance policy, be aware that there are a number of factors that may complicate how much your beneficiaries will receive. For instance, if you designate someone who is not your spouse as a beneficiary on your life insurance policy, their inheritance could be subject to the federal estate tax in addition to any state estate or inheritance taxes. You should also consider the status of your beneficiaries’ income before designating them as a beneficiary on your life insurance policy.
10) Consider your beneficiaries’ needs
Life insurance can be an important tool for providing financial stability for your loved ones in the event of your death. But what type of life insurance do you need? Who should be listed as a beneficiary? And how much coverage do they need?
