Deciding on a Beneficiary
Deciding on a Beneficiary
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Considerations For Choosing A Beneficiary For Your Life Insurance Policy

Buying life insurance is a critical and responsible action to take, requiring careful consideration of your loved ones’ needs should something happen to you. Making sure they’re taken care of is very important, and consequently so is choosing the right life insurance policy. But the key decisions don’t stop there, as you’ll have to know who to designate as the beneficiary of the policy.

What does that mean and how do you choose the right beneficiary for your life insurance plan?

Beneficiaries: what are they and how do you choose?

If you’re buying a life insurance policy for the first time, or if you’ve just never paid close attention to this type of coverage, you might not be aware of what a beneficiary is or why it’s important. A beneficiary that you name on your life insurance plan is the person or institution that will receive the monetary payout from your policy should something happen to you. The whole point of life insurance policies is to ensure that those who are important to you are taken care of financially in your absence, so naming a beneficiary is the first step in allocating those ultimate funds.

Choosing the right beneficiary matters because it will determine the person or entity responsible for making sure those funds are properly used. They will be able to carry out the use of those funds in whichever way you wanted.

Who can be your beneficiary?

When choosing your beneficiary, you should consider who would be the most financially strained in the event of your death, such as your spouse or family. These are the most common selections of beneficiaries, as your insurance policy will make sure they aren’t financially burdened by paying for funeral costs, by any outstanding debts you left, by meeting payments on loans and mortgages if you were the primary family earner, or by future college and living costs for children that you would have paid for.

Beyond that, however, some people go a different route for their beneficiary. You can designate a trust as your beneficiary, which assigns the long-term responsibility of handling your money to a financial and legal institution. Using a trust allows you to plan for specific payments to your children at designated ages or for certain pre-determined purposes, like paying for education or purchasing a house.

Another less common option is to name a given charity or organization as your beneficiary. This is a common option for those who perhaps may not have family, or the family they do have is already financially taken care of, and so a preferred charitable organization can be a suitable payee.

Updating your beneficiary

When you first purchase your life insurance plan, you’ll be required to select a beneficiary, but keep in mind that you can change it as time goes on. In the event of major life events, it may be appropriate to reevaluate your choice of beneficiary. Such events include marriages, births, deaths, divorces, and more.

If you find yourself purchasing a life insurance policy and wondering what the right beneficiary to select is, contact Schechner Lifson today to discuss your options.

Schechner Lifson Corporation