Having a proper understanding of what a beneficiary means and understanding how a beneficiary is named would help name the right person as your beneficiary. For example, if an insured person dies, a beneficiary is a person that has been named to collect the money that the deceased person has left behind.
The money gotten from a life insurance policy can be used in solving financial needs. Still, today, there are arguments regarding who should be named a life insurance beneficiary spouse or child. A life insurance policyholder can name more than one person as a beneficiary in his life insurance policy. Still, while doing this, the policyholder should indicate what percentage each person would get when he eventually passes.
There is something referred to as a contingent beneficiary. This is a backup beneficiary named if the primary beneficiary passes away so that the contingent beneficiary would get all of the deceased person’s money. Your circumstances decide who you get to name as your beneficiary.
Life Insurance Beneficiary Spouse Or Child
People decide to purchase a life insurance policy for the family to have peace of mind when they eventually pass away. A life insurance policy helps protect if a policyholder dies. You should see it from the angle that your life insurance policy is also their source of income when you are no longer there. Life insurance policyholders are mostly the breadwinners of the family.
Most times, people do not give naming a beneficiary deep thoughts, so they name their spouse or child. However, the truth is naming a beneficiary for your life insurance policy is something that requires a lot of thinking, and thinking about it is very easy than you might imagine than compare it to the problems that the family would face down the road when you end up naming the wrong person as your life insurance beneficiary.
However, you should name someone no matter what happens, and if you fail to name a beneficiary, then all of your death proceeds would go directly to the part of your estate when you pass on. This means that your money would not get to your family as quickly as you would have wanted it, and if you left behind some large debts, the money would be used to pay off these debts.
Commonly, people tend to name their spouse as their life insurance beneficiary. Still, if you reside in a community property state, you should talk to your spouse first and get their written consent before naming someone else as your life insurance beneficiary.
If you name a child as your beneficiary, you should also name an adult who would handle the money until they come to manage the money properly. As a policyholder, if you fail to name an adult to handle the money till your child comes of age, then the law court would appoint someone to get it done.
Leaving it to the law court to appoint an adult to handle the money till your child comes of age is very intrusive and expensive. In addition, the money would not be handed over to the child till the child becomes eighteen, but you can avoid all of these.
Another thing that you should do when purchasing a life insurance policy is naming an alternate beneficiary. This is very important because the beneficiary you named in your life insurance policy might die just before you, or maybe the both of you might die at the same time.
Even though the possibility of this happening is very low, naming an alternate beneficiary if your primary beneficiary also dies an important move to make. Finally, there are cases where a policyholder might feel reluctant to make changes and then passes away. Once the policyholder is deceased, no changes can be made any more to the life insurance policy.
This is why we would advise that you update your life insurance policies from time to time and update your beneficiary designations, including payable on death bank accounts, retirement accounts, pensions, and other insurance policies. In addition, updates should be made when you get married, have kids, grandkids, or get divorced.