An important part of a life insurance policy is picking the beneficiary. The beneficiary is a chosen recipient upon your death. Without choosing the beneficiaries, the policy divides among relatives according to the insurance policy. More than likely, the policy will pass to the estate with the rest of your assets and end up in probate court. Because you didn't choose a beneficiary, it may go to relatives that you disapprove of. Avoid the family drama and have your say now.
Life insurance allows policyholders to choose how to divide their policy, mainly choosing between primary, contingent and final beneficiaries. Include the person's name, the percentage they will receive and social security number. Many people have more than one beneficiary in case the recipient dies before you do. Beneficiaries aren't limited to family. Friends and charities are also legal beneficiaries to consider. Add as many or as few people as you wish.
As you choose beneficiaries, consider the following:
1. State: Each state has separate rules involving beneficiaries, probate, death and insurance. Possible beneficiaries must get approval by the state and the life insurance company. If you don't choose a beneficiary, the state will.
2. Age of beneficiary: If the child is underage at the time of selection, set up a trust and a trustee to keep their estate intact.
3. Policy limit: Revocable beneficiaries are changeable. Irrevocable beneficiaries are unchangeable. You need the beneficiary's consent to change it.
4. Your health: If you are legally incompetent, you cannot change or choose a beneficiary, so don't wait.
5. Lifestyle: Marriage, divorce/annulment, babies and deceased beneficiaries interfere with the policy. As soon as it happens, change your policy to include or exclude those participants.
No living beneficiaries: It's very possible that all beneficiaries pass away before you do (or charities close). What happens then? Have a backup plan.
Life insurance beneficiary designation forms are more ironclad than a will. This increases the chances of successfully carrying out your final wishes. It also reduces the chances of contesting the policy in court once you sign it. However, if you have a will, make sure every detail matches the policy.
This is your policy. You chose to take care of your loved ones by planning your future. Have peace of mind knowing the right people will be financially secure.
We’re here to assist you. Call SLO Insurance Services at 805-543-7564 for more information on San Luis Obispo life insurance.