How should I go about naming beneficiaries?

Naming beneficiaries is an important task

Although whole, or permanent, life insurance policies can be used as investments for savings, life insurance is designed to benefit the dependents, family, beneficiaries, or estate of an individual. The insured is the one person who will not benefit from any of this insurance coverage.

Beneficiaries are persons or entities such as a trust, charity, or estate, that an insured designates to receive the death benefits, i.e. the money from the insurance policy. If an insured person does not identify any beneficiaries, the benefit is paid to the insured’s estate, which is usually dependents or other family.

Individuals name primary beneficiaries – the individuals or entities who receive the death benefit if they can be located after the insured’s death. Insurance companies also request that an individual name contingent beneficiaries, as well. These individuals or entities receive the death benefits only if the primary beneficiary cannot be found. If neither type of beneficiary can be found, the benefits will be paid to the insured’s estate.

Instructions for beneficiaries are also helpful. For example, if two primary beneficiaries are named, but one of them has died, what will happen to that beneficiary’s share? Will the other primary beneficiary receive it all, or will a dependent of the deceased beneficiary get that share?

Naming beneficiaries, and keeping the information up to date, is an important task. Beneficiaries should be identified as clearly as possible, with their relationship to the insured, their social security numbers, addresses, and any other information that will help the insurance company find them, and confirm their identity, upon the insured’s death.