Choosing a Beneficiary for Your Life Insurance Policy
Are you thinking about getting life insurance but unsure of who you’d choose as your beneficiary? While choosing a beneficiary can sometimes be a simple and fast process, other individuals have difficulty choosing their primary and secondary life insurance beneficiaries. At Fearnow Insurance, we’ve put together a few tips to help you choose the recipient of your policy.
Revocable and Irrevocable Beneficiaries
Before you choose a beneficiary for your insurance policy, it’s important to decide whether you want a revocable beneficiary or an irrevocable beneficiary. Choosing a revocable beneficiary allows you to change the recipient of your life insurance policy for any reason at any time. If you choose an irrevocable beneficiary, you cannot change the beneficiary of your life insurance policy without the written consent of the beneficiary listed.
Choosing the Beneficiaries for Your Life Insurance Insurance Policy
When you purchase a life insurance policy, you can choose one or more beneficiaries. However, the first name listed is the primary beneficiary. The other beneficiaries are the secondary beneficiaries, and they only receive a payout if your primary beneficiary dies.
The Executor of Your Will
Your life insurance policy will most likely be used to first pay for your funeral expenses and any outstanding medical expenses and bills. If you have a small insurance policy that’s only designed to pay for your end-of-life bills and funeral, you may want to consider choosing the executor for your will as your primary beneficiary.
Your Spouse or Partner
For most individuals, their spouse or life partner is the obvious choice. Your spouse will have many duties to perform and bills to pay upon your death, and their grief may prevent them from working. If this sounds like your scenario, you’ll want to make sure that your life insurance policy contains enough money to pay for your funeral expenses, any outstanding bills, expenses for your young children, and your household expenses for several months to a few years after your departure from this world. It’s important to note that if you do not wish for your spouse to be the recipient, they may have to sign a waiver before you can choose a different beneficiary.
The Individual in Your Life Who Will Suffer the Greatest Financial Loss
You may also want to choose the individual in your life who will suffer the greatest financial loss if you were to depart this world. While this individual may be the executor of your will, your spouse, an adult child who is caring for you, or who you are living with. It could also be a long-term roommate, close friend, girlfriend, or boyfriend. If you are having trouble deciding who to choose as the primary beneficiary of your life insurance policy, it may be beneficial to think about the individual who will need the money the most upon your death.
A Trust Fund
You can set up a trust fund to receive the money from your life insurance policy. This option works well for individuals with young children, a minor or adult child, or a relative that has a life-long disability and will need long-term care. You can also set up a trust fund that is completely separate from your estate so that it is not calculated into the overall value of your estate. Of course, you will need to appoint a trustee in order to manage the fund.
Some individuals prefer to name a charity or nonprofit as their beneficiary. If you have a charity you love, nonprofit or religious organization that has helped you through the years and you strongly believe in their cause and/or mission, you can list an organization as your beneficiary.
Life Insurance Policies at Fearnow Insurance
Here at Fearnow Insurance, our agents can help you choose the right life insurance for your family’s circumstances and help you determine the right primary and secondary beneficiaries so that the individual or individuals who need the money upon your death can receive it. We can also update your life insurance policy after you purchase it in order to reflect your changing life circumstances, like marriages, divorces, and the addition of children.
To learn more about life insurance policies and to get a quote, give us a call at (813) 689-8878.