What Are Beneficiaries?

As the purchases of life insurance have been increasing every year, we want to make sure that these life policy’s death benefits are going to the correct beneficiaries. Nothing is more devastating for families when they find out that the beneficiaries were selected incorrectly. We want to stay ahead of the curve to avoid these headaches and complications when the insured passes on by making sure that the beneficiaries are the intended recipients.

What is a beneficiary?

Beneficiaries are a person or an organization that will receive your death benefit once you pass on. This money is given to your beneficiary tax-free and may be used for any purpose. Your family, your friend, even your local non-profit organization are all eligible beneficiaries. In a life insurance policy, you have the power to even split the death benefit among whomever you wish to receive this tax-free money as long as the split equals 100% of the death benefit.

There is a misconception that individuals that are single, with no family, no spouse, or no children are not able to enjoy the benefits of a life insurance policy while they are still living. I have encountered many clients who fit that the description that has bought life insurance policies that have assisted them when they are much older either by providing some type of Long Term Care or the use of their tax-free cash value that they have accumulated over the years. These individuals generally name their beneficiaries to a cause that the individual believes in or, for example, a church is selected because most individuals attend small congregations (most of my clients attend small churches and the individuals want to contribute back to their church after their passing).

How often should I do a policy review?

I would recommend reviewing your policy every year and not just for the beneficiary. Those of you who have Index Universal Life Insurance policies would want to find out how well your selected indexes have performed and if there are any adjustments you would want to make If you should experience any mammoth changes in your life, marriage, divorce, or to add another non-profit charity, etc., you would want to make sure that your intended beneficiary reflects that change. Remember, you are able to change beneficiaries at any time of the year and adding or subtracting beneficiaries will not affect any planned premiums you are paying.