Life Insurance Beneficiary

by Jeff Rose on September 11, 2012 · 0 comments

life insurance beneficiaryWhen choosing a life insurance beneficiary, it is very important to be clear in the designations of who is going to receive the benefits after the death of the insured.

Due to specifications regarding the wording of beneficiaries, certain members of the family may be left out, while other may be unintentionally included.

It becomes especially complicated when there is an ex-spouse involved, or adopted children.

Should the beneficiary die before the insured, then a contingent receives the benefits instead.

However, this can become complicated if the contingent is a minor and no guardian has been designated. The process of determining insurance beneficiaries can be complicated, especially given the changing family situations that happen with divorce and death.

When deciding on your insurance beneficiaries, make sure the beneficiaries are clearly distinguished, with varying levels of contingents.


Specifying Your Beneficiaries

When writing out who will receive life insurance benefits upon your death, simply putting one word designations like “spouse”, “children”, or “grandchildren” isn’t enough anymore. If you put “spouse,” then former spouses may be included in the event of a divorce. In the case that children are the beneficiaries, then which children will be included must be specified.

Are they only children from your marriage, or do children born out of wedlock count?

Also, it must be specified if adopted children are included, or the children of a spouse which you may have adopted as well. The same applies for grandchildren. Also, if the children are minors, it is generally recommended that a guardian be appointed, as benefits aren’t usually paid to minors.

The beneficiaries can be specific, or a class. Specific beneficiaries are identified by name and relationship to the insured, while a class is identified mainly by relationship, such as “children.” If a class is chosen as a beneficiary, who belongs to that class needs to be clearly identified, as legal complications can arise if the class isn’t distinguished.

Also, it is advisable to have several levels of contingencies. In the case that a beneficiary dies, the benefits will go to the contingent.

However, if the contingency dies as well as the beneficiary, the benefits may be left in limbo, or to be disputed by other family members. That is why several contingencies must be clearly identified, as many complications can arise considering the possibilities of a changing family structure.

Explore all Possibilities with Life Insurance Beneficiaries

When deciding on life insurance beneficiaries, it is best to consider all possible situations. While it may become complex and it is grim to think of the future deaths of you or family members, all of these things do happen. Save your possible beneficiaries the trouble of having to dispute the distribution of benefits, and make sure to define the beneficiaries as specifically as possible.

Don’t use vague wording that may include or leave out people you don’t wish to.

You will want to make sure your benefits go to who you intend them to go after your death. Try speaking with a life insurance advisor to determine how to properly designate your beneficiaries.

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