What Should I Consider When Choosing a Life Insurance Beneficiary?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 02 November 2018
  • Copyright Protected:
    Conjecture Corporation
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Choosing the right life insurance beneficiary is an important part of overall estate planning. There are several issues to consider when making this choice, including how quickly the money passes through the probate process, who will need the money the most, and what you hope to accomplish with this type of arrangement. By taking some time to think the process through, it is possible to identify the right life insurance beneficiary and make sure the proceeds achieve the purpose you have in mind.

One of the first points to consider is what you want to accomplish with the life insurance policy. Often, proceeds from this type of coverage are used to help settle the end of life expenses of the insured party, or to provide at least some financial support for a loved one such as a spouse or partner during those first few difficult months after the loss of the loved one. At other times, the idea is to create some sort of resource that can be used to fund continuing education opportunities for children. If you set specific goals for the money from the life insurance plan and it will be easier to focus attention on a life insurance beneficiary that will be in tune with those goals.


Address the issue of naming an individual rather than the estate as the beneficiary of the life insurance policy. In many jurisdictions, choosing an individual as the life insurance beneficiary means that the proceeds can pass outside the probate process and be delivered directly to the beneficiary. This can be very important if the money is needed to help settle immediate expenses, such as burial costs, the remainder of any hospital bills that were not covered by a health insurance plan, or other costs that a surviving spouse or partner may have to honor.

It is also important to be very specific about the name of the life insurance beneficiary. Many legal professionals will recommend staying away from vague references such as wife, husband, or child, and recommend using proper names. The reason for this is that life changes over time can leave the vague verbiage open to some interpretation, such as whether the intended beneficiary is the person who was the spouse at the time the policy was taken out or the current spouse.

Keep in mind that if the idea is to name a minor child as the life insurance beneficiary, it is important to consult with legal professionals on the best way to make sure those funds are made available to the child through some sort of guardian. Typically, it is possible to identify the process by naming the guardian or legal caregiver as having access to an account in which the funds are deposited in the child’s name. Make sure the account is structured so that when the child reaches legal adulthood, he or she can have direct access to any remaining funds.

Don’t forget to designate a secondary or contingent beneficiary as part of the process. Should the primary life insurance beneficiary pass away before you do, with no time to update the information with the life insurance provider, this will help to ensure the money is still granted to someone of your choosing. Utilize the same basic criteria for the contingent beneficiary as for the primary beneficiary and it should still be possible to achieve the same basic goals.

When choosing a life insurance plan, make sure to go with one that is equipped with a revocable beneficiary provision. This will make it possible to easily update the life insurance beneficiary when and as needed, such as when more children are born, people pass away, or there is a divorce and remarriage. Reviewing the beneficiary on each policy at least once a year is a good idea.



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