When you purchase a life insurance policy, you are signing a contract that requires the insurer to pay a death benefit to your beneficiaries. Your beneficiaries are people that you’ve decided will receive a payout when the insured passes away. Who you choose as your beneficiary is important, especially if the life insurance policy is intended to be used as income replacement.
What Is Life Insurance?
Life insurance offers coverage that protects your loved ones in the case of your unexpected death. Life insurance policies often require you to pass a medical exam before you can receive coverage, and the rates vary based on age, gender, and health status. After you qualify for a plan, you’ll be asked to select beneficiaries. Who you choose may impact how your benefits are dispersed.
Types of Life Insurance Beneficiaries
There are two major types of life insurance beneficiaries. The primary beneficiary is the person or entity that the policyholder has selected to receive the policy’s death benefit once the insured dies. Contingent beneficiaries are people that are next in line for the benefits if the primary beneficiary cannot be found. Contingent beneficiaries are often granted benefits when the primary beneficiary passes away unexpectedly.
Revocable Beneficiary vs Irrevocable Beneficiaries
Life insurance policies come in two forms; one offers revocable beneficiaries while the others have irrevocable beneficiaries. If your plan has a revocable beneficiary, you can change the beneficiary of the policy without getting consent from the current beneficiary. If the policy has an irrevocable beneficiary, then the current beneficiary must be notified before making this change.
Choosing Your Life Insurance Beneficiaries
The beneficiary you choose will dictate what happens with the death benefit once you pass away. The beneficiary can be anyone, including your spouse, children, or an entity such as a trust or charity. When choosing which one to assign as your beneficiary, we suggest that you think about your goals for the policy. If you wish to replace your income so your spouse can maintain a comfortable living, the spouse would make a good beneficiary. If you want to secure your child’s future, consider choosing your child to receive the benefit.
If you need help choosing a beneficiary, why not discuss the issue with a trained insurance professional? They have experience consulting with many life insurance customers, so they can help you decide on a reasonable solution. Innovative Senior Benefits is staffed with a diverse team of excellent insurance agents. Just give us a call to start learning more about choosing a life insurance beneficiary.