You are purchasing a life insurance plan to ensure your loved ones; your family provided for in the future if something happens to you. You make sure that the beneficiary named is someone who you trust. We at Better Insurance have compiled a list of how you should choose your life insurance beneficiary?
But before we discuss how to choose a beneficiary for your life insurance coverage. We should discuss What is a beneficiary? Why is it necessary to select the right person?
Who is a Beneficiary?
In layman terms, a beneficiary is a person who legally gets all of your belongings when you die. A beneficiary can be a person, an organization, or a trust that you officially assign as the legible owner of your property and belonging after you have passed away. You will be called the benefactor, and the person on the receiving end will be the beneficiary. You can name multiple people to act as a beneficiary in your life insurance form.
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Why do you need to name a Beneficiary?
Now, The next question Why do you need a beneficiary? The answer lies in three common words:
- Clarity; Naming a beneficiary makes it unambiguous for your family, your spouse, legal authorities, and the insurance companies to decide whom to give the benefits and claims of the insurance policy. It saves the required time to approach the court and decide on the divisions of the belongings.
- Command; Naming a beneficiary assures during your lifetime that the life insurance claim goes to the right person that you have named; Rather than the court dividing your money amongst the people who you do not want to give the money.
- Speed; After your death, your family or your beneficiary might be in an urgent need to make ends meet. Your family might be in a difficult situation and can be struggling to survive. In such an instance, a named beneficiary will claim benefits of your life insurance plan without any delays from the insurance agency. Beneficiary’s timely claim will save your loved ones from any hardship.
It is pertinent to mention that there are two types of beneficiary you name in a life insurance coverage detailed as below:
- Principal Beneficiary; The person, the organization, or the trust you name as the direct beneficiary of your life insurance. All the claims of life insurance are for this beneficiary only. The naming of the primary beneficiary makes the whole claim process effortless. The right persons receive the mentioned percentage of your coverage.
- Secondary Beneficiary; The person, the organization, or the trust you name who get all the claims and coverage of your life insurance if the primary beneficiary passes away or becomes incapable.
Tips for Choosing the Rightful Beneficiary:
Now, The point arises that how would you select the most capable and rightful beneficiary for your life insurance policy? The following mentioned are some pointers to consider while deciding on a beneficiary for your life insurance policy:
- Firstly, consider those who need the most; There are people in your family or close ones who depend upon you. Your children, your unemployed spouse, or your disabled relative are the ones to be considered first. You purchase life insurance for the people depending upon you can live a better life after you are no more. You do not name primary beneficiaries who are already well-off and can easily sustain without your hard-earned savings. The rightful person can use the claims to pay off their debt or set up a business.
- Do not forget the minor; Your children or your grandchildren are below the age of eighteen or twenty-one are the ones who deserve the protection of your life insurance policy. You can name the minors as beneficiaries and set up a trust fund to manage the finances until the children are underaged.
- Divide the Benefits like a Bodhi Tree; Ever seen a Bodhi Tree with all its extended branches and sub-branches. Similarly, You can make a beneficiary arrangement that in-case your beneficiary passes-away all the rights of the beneficiary will go to his children.
- Get a thorough understanding of the state laws; It is rather appropriate to understand the laws of the state you live in or from where you are buying the life insurance policy. Understanding the law can help you make a better legal decision regarding the minor beneficiaries, their age, guardianship regulation, spousal rights, and property claims.
- Always have a plan B; It can happen that your beneficiary passes-away or becomes incapable before you die. A more appropriate thing to do is provide a contingent beneficiary or a secondary beneficiary in the life insurance policy form.
- Submit proper identification of the beneficiary; People with the same names as your beneficiary can commit fraud. Always submit complete identification documents for the beneficiary to avoid any chances of fraud and forgery.
- Have multiple beneficiaries: Rather than relying on a single beneficiary, divide the wealth from the life insurance among several people who you think are rightful and can get a benefit from the saving you did in your lifetime.
- Be very clear when bestowing your estate: Estates can become the beneficiary of your wealth from the life insurance policy. But when you are making this decision, always maintain transparency regarding the management of the estate. You have to give clear instructions on how to manage funds from the life insurance for the estate. You must provide all this information to the insurance company to observe accuracy in this matter.
- Consider all of the options available; Keep a clear understanding of the alternatives you have for the beneficiary. You can select a trust fund, fund managers, an estate, or an organization as a beneficiary instead of a person. Charitable organizations can also become beneficiaries of the claims of the life insurance policy.
- Do not delay, Decide now; Decide who to make your beneficiary today, for your life insurance or property.
Agents from Better Insurance assist you in deciding which beneficiary to choose. Better Insurance has trained customer representatives. Our representatives are available to guide your queries and resolve any doubts in your mind regarding your life insurance policy. Please feel free to contact us for your Life Insurance Policy.