Your life insurance beneficiary plays a very important role in your policy. Choosing the right person, or people, means that you have a trustworthy, reliable source for your end-of-life expenses.

What is a Beneficiary?

When you purchase a life insurance policy, you sign up to make monthly premium payments in exchange for a sum of money called the death benefit. This can range anywhere from $2,000 to more than $1 million depending on the policy you choose and how much coverage you need.

Your insurance policy will release the death benefit when you, the policyholder, pass away. So, someone needs to receive and use it on your behalf. This person is called your beneficiary.

Choosing the Right People

You can choose one or more people as your beneficiaries. Typically, it’s recommended that you choose at least two. That way, the responsibility of the death benefit is shared between two people, both to relieve some of the responsibilities and to hold each other accountable to using it properly.

Your death benefit will cover your end-of-life expenses like funeral planning, mortgages, day-to-day living expenses for your family, and even things like inheritances and charitable giving.

It’s important to know what your life insurance policy needs to cover when choosing your beneficiaries. That way, you can communicate with them and make sure that they are putting the money towards the right needs. So, when choosing your beneficiary, make sure you choose someone who understands your needs and someone you can easily communicate with.

Trust is also a major component. You need someone you can trust to use your death benefit the way you intended. Unlike a will, a life insurance policy isn’t legally binding to use in a specific way, so it’s up to them to follow up on their promises.

Who Not To Choose

Keep in mind important factors that could influence your death benefit. For instance, though you may want to choose someone under 18 as your beneficiary, you both will have a number of legal hoops to jump through to do so, and they may not receive the death benefit until they turn 18.

Also, choose someone that will likely still be living when you pass away. If your beneficiary passes away before you do, you will have to choose another one. Also, though it is a very unfortunate circumstance, your spouse could potentially pass away at or around the same time as you. If you choose them, you should choose someone else as well.

Make the Smartest Choice with BIM

Better Insurance Management will help you make the best decisions for your future. Call us at (732) 458-5000 to learn more about life insurance.