Naming a Beneficiary to Your Policy

After choosing an agent to work with, one of the next choices you will have to make when you set up your permanent life insurance policy is naming your beneficiary. The beneficiary is the person who will receive the insurance benefit money. A beneficiary can be your child, a spouse, parent, friend, or anyone that you name personally. Alternatively, you can also transfer the money directly into a trust fund or donate it to a specific charity. If you do not name a beneficiary, the insurance company may disperse the money according to your state's laws.

Naming a Spouse Beneficiary

If you name your spouse as your sole beneficiary of your never ending policy, he or she will receive all of the benefit money and disperse it as he/she sees fit. Make sure that if you get remarried, you change the beneficiary to your new spouse's name. You just want to make sure your new spouse gets the money and not your ex! Likewise, if you get divorced and do not remarry, change the beneficiary to someone else, like a family member. You are also able to designate a life partner or friend as the beneficiary.

Minor Children Insurance Beneficiaries

Most people buy life insurance to make sure their children are cared for in the event you can no longer provide an income. The number of children you have will affect your rates and premium payment. Obviously, the more children you have, the greater payout you want for them. This will increase your rates, quotes, and monthly premium, but it will provide greater lifetime coverage. If you decide to name minor children as beneficiaries, you will also need to appoint a legal custodian to manage the money for them until they reach a senior status of eighteen years old.

Trust Funds, Charities, Estates

Instead of naming a specific person as a beneficiary, you can give the money to a charity or non-profit organization. This method may give you certain tax benefits, but consult with your agent and/or accountant beforehand. You may also name your personal estate as the sole beneficiary. This gives you a lot of flexibility in choosing how to disperse the money.

If you have young children but do not want to appoint a custodian to handle their money, you can set up a trust fund for them. You may specify how much money they are allowed to access each month. This is a common setup for single people with minor children.

Reasons to Buy Insurance

The main reason people buy insurance policies is to take care of their family. If you have children or a partner who depend on your income, then you should make sure the payout will match or exceed your income. This money will help your family pay for expenses like funerals, college, and weddings. With college tuition getting more expensive, you will want to be sure your children won't struggle financially through four or more years. Leaving your family a life insurance benefit is just another way of showing them you care about them.

Compare Your Insurance Beneficiaries

As you see, there are many ways you can begin naming a beneficiary to your policy. It is a personal decision that you may need to think about for awhile before making a decision. Consult with your life insurance agent about naming your beneficiary. Some companies may have restrictions about to whom you may give the money. You can choose to leave it to a person, estate, account, or a non-profit. Of course, you may always rename a different beneficiary if you change your mind or your family situation changes.