Whether you have dependents or not, buying an Individual Life Insurance policy is a gift to yourself and those you love. If you have life insurance, you have the peace of mind of knowing that should something happen to you, your loved ones will not be burdened financially. They will be able to celebrate your memory without anxiety about how they will be able to afford a funeral or continue to pay their bills without your income. When purchasing life insurance it is imperative that you identify your policy’s beneficiaries. Avoid these mistakes when choosing a beneficiary to ensure your wishes are carried out.
Make Sure to Name Secondary or Contingent Beneficiaries
You can name as many beneficiaries as you want (you’ll need to designate the amount you want each to receive upon your death.) At minimum, make sure to name at least two beneficiaries. If the primary beneficiary (the person you want to receive most or all of the proceeds) dies, your policy will go to the secondary or contingent beneficiaries. If you have not designated secondary or contingent beneficiaries, your policy will go to your estate and be subject to probate and, possibly, creditors’ claims, according to the Internal Revenue Service.
A Policy without Designated Beneficiaries is Subject to Probate
It is possible to purchase a life insurance policy without designating one or more beneficiary. In this case, your loved ones will have to wait until the estate is settled until they receive proceeds. Creditors are able to make claims against an estate but typically cannot stake claim to life insurance funds that have designated beneficiaries.
Changing Beneficiaries in Your Will is Not Sufficient
Often, life circumstances (divorce, remarriage, the birth of children or grandchildren) necessitate changing the beneficiaries on a life insurance policy. With the exception of beneficiaries you designated as irrevocable, you can change beneficiaries at any time. However, changing the named beneficiaries in your will is not sufficient and will not override the beneficiaries listed on your policy. You absolutely must submit a signed and dated change-of-beneficiary form to your insurer.
If you would like to purchase a life insurance policy, or have questions about beneficiary designations, we are here to help. Contact us at Newman Crane & Associates Insurance, (407) 859-3691.