by Jeffrey C. Fleischner, JD
Vice President, Set for Life Insurance
Choosing the right beneficiary for your life insurance proceeds, and making the designation correctly are extremely important to effectuate your intentions for the death benefit proceeds after you die.
Policy beneficiary designations should be reviewed by policy holders periodically to ensure that they still reflect the goals policyowner. The most common problems in the designation of beneficiaries arise after the policyowner is divorced or remarried. If the policyowner does not update the beneficiary designation, then the wrong individual could collect the life insurance death benefit!
In many situations, spouses designate each other as the beneficiaries of each of their policies. (You do not have to be married to designate someone as your beneficiary, since the death benefits of the life insurance pass by contract law.) The designation of a spouse makes sense when there are dependent children whom the surviving spouse is responsible to raise. The life insurance proceeds will provide the financial basis for the family’s needs to be met. However, as children mature and eventually become independent, it may make sense to have the adult children listed as beneficiaries. This decision will depend on the policyowner’s financial situation, and how they have their estate planned.
It is also important to consider whether to name contingent beneficiaries for the life insurance policy. The contingent beneficiaries will receive the policy death benefit if the primary beneficiaries have already died. Again, periodically checking these designations are important so that the proceeds go to those individuals that you specify.
If you have any questions about your life insurance policy’s beneficiary designations, then please feel free to contact us.