How to choose or change a life insurance beneficiary
Choosing someone to receive your life insurance benefits is an essential part of getting coverage. There’s no simple way to sort through the most important people in your life — and then choose one or two who you want to take care of even after you’re gone. While you can’t take the emotion out of this decision, you can look at all of your possible beneficiaries and think about how choosing them will affect the important people in your life.
What is a beneficiary?
Your beneficiary is the person who gets a payout from your life insurance policy.
Most people name one person, and then a backup beneficiary as well. Some name multiple beneficiaries — usually a spouse or partner and another family member. While you aren’t required to name a beneficiary, you probably should. If you pass away without having someone there to claim your policy amount, it becomes part of an estate. That will make it more complicated for the person who's getting your money, and you want this to be the least of their worries.
With these things in mind, you can look over your options for choosing beneficiaries for life insurance.
Your partner or spouse
If you’re married or in a long-term relationship, making your spouse or partner your beneficiary might make the most sense. Your partner can cover shared expenses, such as mortgage payments, and pay off any outstanding personal debts.
Your children or dependents
Do you have kids or dependents? You can name them as beneficiaries on your life insurance. This is often the first option for single parents without serious partners or spouses. This option makes perfect sense, as your kids or dependents might be the main reason behind your decision to buy life insurance. You may want to make sure they have money for school or can easily foot the bill for any debts that you leave behind.
You should also keep in mind that this can get a little complicated if you have young children or minors who depend on you. Most insurance companies will make you choose an adult custodian or legal guardian who can help your kid or dependent manage your benefits should you pass before they turn 18.
Your family members
Outside of your partner, spouse or children, a relative is a strong option when picking a beneficiary. Choosing a relative — or someone else in your family that’s near your age or slightly younger — may be a good idea. If you want, you can make one of your parents a beneficiary too.
Your close friends
While family members make common beneficiaries, you can also name your close friends on your life insurance policy. Most insurance companies are fine with this.
How do I choose my backup beneficiary?
You have the option to pick a contingent beneficiary. This is someone who can step in to handle your life insurance benefits if your original choice isn’t around. When might this happen?
If you named your partner or spouse as your beneficiary but he or she passes away at the same time as you do, someone else needs to be there to get your money in order. A backup person can do that.
You can pretty much pick anyone you like for this important role, but be sure to think about some of the issues noted above.
How do I change my beneficiary?
No matter which approach you take to naming your beneficiaries, you should know that you can make a switch if necessary. It’s simple — to change a beneficiary, you just send the new person’s details to your insurer. It’s a good idea to have a few backups in mind at all times, as you never know when you might need to make a change.
Do you feel like you’ve got a handle on how to choose a beneficiary? Ready to find a life insurance policy that’s right for you and your family? Think about connecting with TruStage. Our licensed agents can help you find a term life insurance or whole life insurance plan that meets your needs.