What Is a Life Insurance Beneficiary 

What Is a Life Insurance Beneficiary

What You Need to Know About Life Insurance Beneficiaries

Have you ever considered what would happen to your spouse, children or other family members in the event of your untimely passing? If your current income provides primary support to the household, your death could provide a devastating financial blow resulting in repossession of vehicles, foreclosure on the family home or even bankruptcy. Thankfully you can prevent this hardship by ensuring that you have life insurance appropriate for your situation.

Term life insurance covers a specific period of time. For example, you may purchase a 10-year term life insurance policy that would pay out if you passed away during that 10-year period. As part of the life insurance policy, you name a beneficiary who will receive the payout if your death occurs. Although this is traditionally your spouse, you can choose anyone you want to be listed as the beneficiary. You also have the option to change your beneficiary at any point in time.

Who Do I Name as a Beneficiary

Determining who should be listed as the beneficiary on your life insurance can be a difficult decision. Here are a few questions to ask yourself to aid in selecting the right life insurance beneficiary.

  • Who is dependent upon me for financial support?
  • What expenses do I cover cover or pay for others?
  • How will my financial dependents cover their expenses without me?
  • What potential financial hardship will occur for my family members or friends with my death?

In addition to listing a primary beneficiary on your life insurance policy, it may also make sense to list a secondary or contingent beneficiary as well. The secondary life insurance beneficiary only receives payout of your policy in the event that your primary beneficiary dies before you do. For example, if your spouse is listed as a primary beneficiary but you are both killed in the same car accident, a secondary beneficiary may receive the payout of the policy.

Can I Have More Than One Primary Beneficiary?

Depending on your circumstances you also may need to have more than one primary life insurance beneficiary. This is possible as you can allocate what percent of the policy goes to each primary beneficiary listed. You may list your spouse as a primary beneficiary with 50% and your two children as primary with 25% each. This would ensure each receive the designated percentage of your policy upon your death. Of course, be aware that minor children can't receive life insurance payouts, so their payout will need to be managed by a trust or court-appointed adult until they turn 18.

Finally, it's important to consider exactly how much life insurance is right for you. You want to make sure that you choose a policy that will cover your earnings. Often it is recommended to choose a policy that is worth 10 times your annual salary. This is calculated in the table below. However, you should take into account your personal circumstances versus what is recommended when you determine how much life insurance you need.

Life is unpredictable. While you envision and hope to grow old before you die, the reality is that accidents and illnesses happen without warning. One moment you're here, and the next moment you're gone. No doubt, your family members and friends will experience great sorrow and grief at your untimely passing. However, they may also feel added stress and pressure if your passing has resulted in financial hardship as well. You can ensure stress is not an extra burden during their time of grief by reaching out to us to learn more about the different term life insurance options and what's right for you.

Life Insurance Policy Amount Based on 10x Your Annual Salary

Annual Salary Life Insurance Amount
$25,000 $250,000
$50,000 $500,000
$75,000 $750,000
$100,000 $1,000,000
$125,000 $1,250,000
$150,000 $1,500,000
$175,000 $1,750,000
$200,000 $2,000,000

Disclaimer: TermLifeInsuranceUSA.com is not a licensed insurance agency or broker. The content of this website is for informational and comparative purposes only and is not intended to take the place of professional advice from a licensed insurance agent. TermLifeInsuranceUSA.com recommends that all consumers consult with a licensed insurance agent before purchasing any insurance policy.

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