Joshua Wilson

Joshua Wilson

Managing Representative

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Who Can Be My Life Insurance Beneficiary?

Who Can Be My Life Insurance Beneficiary?

Do you have a recipient in mind for the proceeds of your life insurance policy?

Many people have someone in mind before they purchase their policy. This person or entity can be named as your beneficiary. Naming your life insurance beneficiary helps to ensure that the party you choose gets the proceeds of your life insurance policy, even if your will leaves your estate to someone else. If you’ve decided that you want to provide for a special person or organization through your life insurance policy, it’s important that the beneficiary section will do what you expect.

Here are some simple tips that can help point you in the right direction:

Choosing Your Life Insurance Beneficiary
Who you name as your beneficiary is a deeply personal decision, and there’s no right or wrong answer. Here are some areas to consider:

  • Family: Spouses, children, siblings, and parents: These are all very common choices as life insurance beneficiaries. However, children under the age of 18 are a special case. Life insurance companies won’t pay a death benefit to a minor, so you may want to set up a trust for the child’s benefit or choose a responsible adult whom you trust with the welfare of your child. This adult would be named as their guardian.
  • Legal guardian: If your life insurance policy does name a minor as your beneficiary, it may be a good idea to name a legal guardian for the child.
  • Trusts: You can name a trust as your life insurance beneficiary, and trusts are helpful, for instance, when naming a minor, pet, or someone who may not be great with handling their finances as a beneficiary.
  • Friends, etc: You can also name a friend as a beneficiary – assuming your friend isn’t a minor, in which case you can name a legal guardian or trust for the minor.

Note: Contrary to popular belief, you can’t name a pet as your beneficiary — but you can name a trust on behalf of your pet. (Sorry, Fluffy.)

Multiple Beneficiaries and Contingent Beneficiaries
You can name multiple beneficiaries for your life insurance policy, but when doing this, it may be beneficial to use percentages rather than fixed dollar amounts. For permanent life insurance policies, like whole life insurance and universal life insurance, the death benefit payout amount can change over time, making percentages a better strategy for multiple beneficiaries.

You can also name contingent beneficiaries. Think of a contingent beneficiary as a back-up beneficiary. In the event that your primary beneficiary passes before you do (or at the same time), the proceeds of your policy would then go to the contingent beneficiary.

Final Thoughts
Avoid using general designations, such as “spouse” or “children” as your beneficiary. Spouses can change, as divorce statistics remind us, and you never know which long-lost “children” might appear if there’s a chance of a payday from your life insurance policy. In the very best case, general designations will cause delays in payment to your intended beneficiaries.

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