It’s stressful to be a provider in a family. That’s why benefits like life insurance exist — to provide when you aren’t there to provide anymore. It can be uncomfortable having these talks with yourself. “Who in my life would need financial aid if I were to die?” Questions like that are hard to answer. The reality is that seeking those answers is as important as budgeting. Here, we’ll help you understand what a beneficiary is and give you some advice for when you choose one.
First, let’s tackle exactly how life insurance works. In short, it ensures the person/people of your choosing get paid a cash benefit in the event of your passing. Some people use this as a way to leave a legacy while others do it to ensure their loved ones aren’t stuck paying off their debts. In the end, it’s all done for the same reason: To give peace of mind to yourself and the ones you love.
Now that we have a grasp on how life insurance works, let’s talk beneficiaries. A beneficiary is a person or entity you name in an insurance policy to receive a payout. It could be your family, a friend, a charity, and it can even be a business partner! Think about the names and faces that led you to a life insurance policy in the first place. Only you can decide who you want your beneficiaries to be, so choose carefully!
When it comes to naming your beneficiary, here are some tips you’ll want to keep in mind to ensure your money goes to the right person:
If you have more than one person listed as a beneficiary to your policy, include the percentages you intend for them to receive! For example, if you’re leaving a legacy to your children you may want to divvy it up equally between them. Even if you’re providing for one person, make sure they receive “100%” of it.
Include as much information about the person as you can. This includes their full name, their relation to you, and even their Social Security number if you have it. We’ve heard horror stories about little technicalities keeping beneficiaries from receiving their benefit.
Review your policy often. Why? Because major life events like a marriage, divorce, or birth could cause you to change your priorities. Life changes, so ensure your beneficiaries match your intentions.