Adding a life insurance beneficiary to your insurance plan is something which is from the “required fields”. You cannot miss this and proceed with your buying process. No one would ever be willing to die but deciding a life insurance policy is an asset and it has to be bought.
Selecting a beneficiary can be a tough task if you are not clear about the insurance policies and the benefits. The chief purpose of adding a life insurance beneficiary is to secure the financially dependent members of your loved ones against any unforeseen situation.
Who is a Life Insurance beneficiary?
Many of you might not know what a beneficiary means. To make it clear; a beneficiary is a person who will be receiving the benefits of the policy when you die. Life Insurance beneficiary can be or even two; you need to decide what percentage of benefit each will hold. The proper analysis shall be made as to who will be the most benefited person while claiming the insurance.
Who should be Your Life Insurance Beneficiary?
Some tips and guides can help you get the right plan and even in deciding the beneficiary name. The underlying points can help you clear your dilemma.
#1: Dependent members
A family consists of members who are partially or fully dependent upon you financially. This might include your spouse with kids or your parents with some pension coming at the retirement age. Now here comes the point where you have to decide like who is more likely to suffer after your demise. Your kids and even your spouse might need it because they have a long way to go due to their young age.
#2: Make a back-up plan
This means that while deciding your life insurance beneficiary you must have a secondary beneficiary name with you because a situation might arise when the primary beneficiary refuses the proceeds or is deceased at the time of your death. One should always make a primary as well as a secondary life insurance beneficiary.
#3: Consider aptly when the beneficiary is minor or disabled
Minors cannot manage the assets by themselves and hence this is your duty to name a beneficiary who is a minor’s guardian or caretaker. The insurance companies do not pay to the minors and to get the benefits being claimed by the guardian, the court needs to approve the same.
#4: Divide the share between primary and secondary life insurance beneficiaries
If you are quite sure that in your family there is more than one dependent member, then you should think this in advance and make a wise decision by dividing the shares of the life insurance accordingly among the beneficiaries.
#5: Better to avoid nominating Minor as the beneficiary
If we nominate a minor as the beneficiary, there is a long process to get the claim of the insurance to that minor. You might need several steps to follow before the court to get the amount of the benefits because the minor is considered as legally not capable of understanding finances correctly. Therefore, it is better to avoid nominating minors in life insurance as a beneficiary.
#6: Think if you are a single parent
Again the question comes to the minor if you are a single parent and you are making a term life insurance plan at a young age. This will be but obvious that you are going to nominate your child as the life insurance beneficiary. The minors will never be allowed to avail of the benefits so the single parent should make clear documentation for the same.
Read Also: Life Insurance for single parents: Everything you need to know!
An alternate idea is to have the beneficiary as someone trustworthy rather than the minor. It might be someone close in your family. This entirely depends upon you. This will help you in easing out your burden. Make a will mentioning every minute detail so that no flaws remain later on. The help of a knowledgeable person can be good at doing this.
#7: Be clear of all kinds of laws
Laws vary from state to state and from country to country. Remaining aware and keeping knowledge of all kinds of laws is very important. There are many questions that come in mind before you purchase a plan and name a beneficiary; like, how the claims can be made from the insurance companies? Who the beneficiary is and what laws hold for all kinds of beneficiaries and many other questions.
The laws are not understood by a layman; hence a legal advisor is required to know the state as well as the center laws. Think and understand all the documents before making any decision.
#8: What if there is no beneficiary added?
If you forget to order beneficiary or purposely if you do not nominate the beneficiary for the life insurance then the government will take over your funds and they will decide how to utilize the funds.
Read Also: 8 Ways to curb down your Life Insurance costs
This might take the time or maybe an easy process depending upon the government work and speed. Therefore, if you want your money to be in the right hands, always designate a beneficiary in your life insurance.
#9: Check for every minute detail while filling the beneficiary name
Just naming a beneficiary for life insurance is not the only task. You have to give details about the beneficiary like name and other details. Periodically checking and reviewing the details that you have given to ensure accuracy.
Bottom line
Electing the life insurance beneficiary can be a daunting task. The decision has to be made thoroughly and a constant grilling has to be done before nomination. Usually, the spouse becomes the beneficiary. But you decide the beneficiary, according to the situation and family demands.
By attaining the life insurance and adding the beneficiary you are invisibly doing two things; gaining peace of mind for the future and also going to pay lower premiums if you have started the policy earlier. Be diligent in choosing a life insurance plan and naming your beneficiary.
