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Tips and Tricks for Choosing a Good Beneficiary


When you purchase a life insurance policy, you must choose a beneficiary. This is the person (or persons) to whom the insurance company will pay out benefits in the event of your death. Naming a life insurance beneficiary is an important decision to make. Keep the following tips in mind to help you choose the right beneficiary for your life insurance funds. 

Consider All Your Options

You can name anyone you like as your beneficiary. It doesn’t have to be your spouse or your children. Your designated beneficiary could be your estate, the trustee of a trust you set up, a non-profit organization, a company or other legal entity, a single individual, or two or more people, with death benefits divided among them as you specify. A trust may be the best option if you want to provide for small children through your life insurance benefits. Our agent can advise you on the pros and cons of the various options. 

Evaluate Your Purpose for Buying the Policy

You can’t take life insurance proceeds with you. If you are purchasing a policy, there must be someone or something you want to provide for after you are gone. If the purpose is to provide for your family, the best beneficiary may be your spouse or the trustee of a family trust you establish. If you have built a business that you want to continue after your death, you could name your partner or the company as your beneficiary. 

Have a Contingency Plan

Life insurance is designed to protect the ones you leave behind in case something should happen to you. But life is uncertain, and something could happen to a beneficiary as well. Be sure to name one or more contingent beneficiaries who will receive your death benefits if your primary beneficiary is deceased, cannot be located, or refuses the proceeds. 

Be Specific In Naming Beneficiaries

Do not name “my spouse” or “my children” as beneficiaries on a life insurance policy. List them individually and specifically by their full names. If you have more than one child and want to name them as beneficiaries, be sure to specify where the benefits go if one of your children dies before you. Would all death benefits go to your surviving children, or would the deceased child’s portion go to his or her children?

Do Not Designate a Minor As Beneficiary

Minor children are limited or prohibited by state laws from receiving life insurance proceeds. If you name a minor child as beneficiary and that child has not reached the age of majority at the time of your death, the court may have to appoint a guardian to administer the funds. You can avoid this situation by setting up a trust and naming a trustee to receive the proceeds for the benefit of the child. 

Review and Update Your Policy Regularly

There could be many reasons why you might want to change your life insurance beneficiary as time goes on. For example, you might have married or divorced or had a child. A person you named as a beneficiary might be deceased. Reviewing your policy regularly can help ensure your death benefits go where you want them to go. 

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