With a term life insurance plan, the policyholder must choose who will receive the proceeds of the policy. That person is called a beneficiary. The policyholder can name one or more beneficiaries to the life insurance policy. Many policyholders name their spouse, children, or close family members as beneficiaries to protect their loved ones from having to foot the bill for burdensome end-of-life expenses.
But it’s important to understand the role of a beneficiary and how to go about naming one before you set up the details of your term life insurance policy. In order to help you make the most of your term life insurance, consider some key dos and don’ts of naming a beneficiary.
DO name at least one primary beneficiary and consider naming a contingent beneficiary. A primary beneficiary is exactly what you’d expect – the first person to inherit the benefits of your term life insurance policy. A contingent beneficiary would receive the benefits if your primary beneficiary dies before you.
DON’T be vague about naming beneficiaries; family titles like “spouse,” “wife,” and “children” aren’t enough. When naming a beneficiary, you will need the beneficiary’s full legal name and often their social security number too. Have both of those on hand when completing the term life insurance policy.
DO talk to your agent before naming a minor child as your beneficiary. Many term life insurance policies allow you to name a minor as a beneficiary; however, keep in mind that most state laws prohibit payment of life insurance proceeds directly to a minor child. If you die while your child is still a minor, payment will be made to the person who is ultimately appointed as the minor’s legal guardian or custodian.
DON’T forget to include adopted children or grandchildren, if you want them to inherit part of your term life insurance policy.
DO re-visit the beneficiaries you listed when your term life insurance policy renews. Even if there are no changes to who is receiving the benefits, you want to make sure all the information is up-to-date.
DON’T be afraid to ask questions of your Direct Auto & Life Insurance agent. They’re here to help find the best term life insurance policy for you and for your beneficiaries.