(Newswire.net — April 16, 2022) —
When you purchase a term life insurance policy, you have to choose the people who will receive the death benefit payout if you die while your coverage is active. These are your beneficiaries. You can designate several beneficiaries, from family members to charitable organizations. This article will provide information to help you name a beneficiary or beneficiaries when you find a term life insurance quote that fits your needs.
Who can I designate as beneficiaries?
You can designate nearly anyone as a beneficiary. Here are some common choices:
- Your spouse: Many life insurance policyholders name their spouse a beneficiary. This can help your spouse replace your income and continue providing for any children you have.
- Relatives: Some people name relatives as their beneficiaries. For instance, you might make your parents beneficiaries to cover their costs associated with old age, such as increased medical care.
- Trusts for children: Most states don’t let life insurance companies pay death benefits to minor children. However, you can designate a trust to receive the death benefit and manage it for your child until they reach adulthood.
- Charitable organizations: If you are passionate about a charitable cause, you can name a charity as a beneficiary. You can also set up a trust if you want more say in how the charity uses your death benefit.
How to pick beneficiaries
Here are some tips for picking your beneficiaries:
1. Look at your coverage amount
Know how much of a death benefit you want. The larger your death benefit, the more money you can spread around to beneficiaries. For instance, a $500,000 death benefit offers more wiggle room than a $300,000 death benefit.
2. Determine who depends on you financially
Consider who relies on you for financial support. For instance, you might want to prioritize your non-working spouse and children who will use the death benefit to replace your income.
On the other hand, maybe your kids are out of the house, but your parents are getting older and will need assistance covering medical bills. Allocating some of your death benefit to your parents will give you peace of mind knowing they’ll be able to afford costs associated with aging.
3. Decide how many beneficiaries you want
More beneficiaries means splitting the same benefit over more people. It’s important to figure out how many beneficiaries you want to name so you can allocate the right amount to each one.
4. Consider contingent beneficiaries
Contingent beneficiaries are back-up beneficiaries that receive your death benefit if a primary beneficiary dies, can’t be located, or refuses their death benefit payout. If all of your beneficiaries accept your death benefit, they won’t get a payout, but it’s smart to name contingent beneficiaries to ensure your coverage is completely paid out.
The bottom line
Choosing your beneficiaries is one of the most important steps in getting a term life insurance policy. Fortunately, there are many options, from family members to charities. So, make sure you know how much death benefit you have available and how many beneficiaries you want to name. Prioritize those that depend on you financially, but make sure to designate contingent beneficiaries just in case. This will help your insurer follow your wishes and protect your loved ones financially.