Life is full of uncertainties, but one thing you can control is how your family is cared for after you're gone. Choosing the right beneficiary ensures your life insurance does what it’s meant to—help provide financial security for those who matter most. Part of the process of buying life insurance is choosing a beneficiary—the person (or people) who will receive the money from your policy once you pass away. This is an important decision that helps protect your loved ones from financial hardship. Here are five things to consider when choosing a beneficiary.
There are two levels of beneficiaries: a primary beneficiary is the first person who will receive your life insurance payout. A contingent beneficiary is the backup, in case the primary beneficiary is unable to receive the money. You can name more than one beneficiary and decide how much each one gets.
The Insurance Information Institute (iii.org) suggests you should make the identity of your beneficiaries very clear including full names and social security numbers. This will make it easier for the life insurance company to locate them and minimize any disputes that could arise regarding benefit distribution.
Your beneficiary should be someone who depends on you financially. For example, let’s say Jasmine and Sean just got married. Sean adds Jasmine as his primary beneficiary so she will be financially protected if something happens to him. Jasmine does the same. She names Sean as her beneficiary on her life insurance policy.
A few years later, they have children. Now, they want to make their kids contingent beneficiaries on their policies. That way, if Sean or Jasmine are unable to receive the money, their children will be taken care of. Life changes, so your policy should too.
Though people typically name their spouse, children, parents or other family members, you can also choose:
If you name a minor child, the money may need to go into a trust or be managed by a guardian until they are old enough to receive it.
Life changes—marriage, divorce, new children, or the loss of a loved one can mean your policy needs an update. If Jasmine and Sean had another child or if Sean passed away, Jasmine would need to update her beneficiaries to make sure her kids were still protected.
Choosing a beneficiary is an important decision, but you don’t have to do it alone. Let a Kemper Life Insurance agent come to your home to answer questions and advise you on the best choices for you, your family and budget because peace of mind has its benefits.
Source: https://www.iii.org/article/what-beneficiary
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This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal, or estate planning professional.”
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