When you decide to invest in a life insurance policy, you are choosing to protect your loved ones in the event of your passing. With such policies, you can choose the beneficiary or the person that will receive the payout of your policy upon your death.
This beneficiary can be your spouse, child, or anyone else that you choose, as there are usually no restrictions on such. This choice, however, should not be made lightly, as it is a crucial part of the process.
So, how should you choose your beneficiary, and what else is there to know when doing so? Let’s review some crucial facts that may help you in making that decision!
What is a Life Insurance Beneficiary?
Your life insurance beneficiary is the person or entity that receives the payout of your life insurance policy upon your death. This can be a single person or group of people, a charity of your choice, a trust, or even a business.
If you do choose a person/people, these can be whomever you choose, but in Louisiana, your spouse would need to waive their rights if you do choose an entity other than that spouse.
You do, however, have restrictions if you choose a minor as your beneficiary. In that case, you would need to designate a trust or name a legal guardian as the beneficiary on behalf of the minor. Otherwise, the choice is up to you!
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What Does the Beneficiary Need to Do or Know?
Once you have named someone as the beneficiary of your life insurance policy, you should first let them know of the designation if you have not already discussed this with them. Providing them with a copy of the said policy may also help them in the event that they would need to file a claim.
Also, because the beneficiary will collect the life insurance funds, they will need to have the best knowledge of what medical/funeral costs need to be taken care of as well as where the remaining (if any) funds are to be distributed.
How to Choose Your Life Insurance Beneficiary?
When choosing a beneficiary, it might benefit you to know that you can usually name a primary beneficiary and a secondary beneficiary. The secondary beneficiary would only receive the payout in the case where the primary beneficiary has also passed or cannot receive the payout for any reason.
In order to best decide, you may want to first discuss and/or review your financial situation and decide who may need the benefits the most.
For example, if you die, would your spouse best use the funds to pay off debts incurred, replace your invoice, and for day-to-day expenses? If you are single, you may want to consider a parent, sibling, or friend that may have helped you on a previous loan or financially in any way.
Lastly, if you want the payout to go to your children, review your state’s and policy holder’s rules in regard to minors as beneficiaries. You may need to name a trust as the beneficiary to ensure they receive the funds upon their 18th birthday. In summary, always make a fully informed decision and not one motivated by ulterior motives.
Read Also: Can I Have Multiple Life Insurance Policies?
Having a life insurance policy is a great way to ensure that your loved ones are covered financially in the event of your death. Your beneficiary will be responsible for delegating those funds, so be sure to keep that choice updated as you go and grow through life.
If you have any questions regarding your life insurance policy, beneficiaries, or any other insurance questions and are looking for a great life insurance agency in Lafayette, Franklin, or Abbeville, LA, look no further than Thomson, Smith, and Leach! Contact us today for a quote on various policies that can help keep you and yours protected for years and generations to come!