The beneficiary in life insurance means the person(s) (or entity) that is authorized to receive death benefit in the event of your death. You need to establish your beneficiary at the time of defining the terms of life insurance policy. Your spouse, children, parents, business associate or partner could become beneficiary in your life insurance policy. You can also designate more than one people, a charity, your estate or a trustee (if a trust exists) as beneficiary. In case no beneficiary exists in the policy, the estate becomes the default beneficiary.
Points to consider for life insurance policy
- Changing your beneficiary in your will is not accepted as otherwise you have to make appropriate changes to your life insurance policy through your insurance company.
- If your estate is named in your life insurance policy as the beneficiary, there could be taxes for your estate. The policy will be included to your estate.
- If there is an irrevocable life insurance trust that was created for protecting your estate, you lose control over any change to the beneficiaries.
- It is very important to name two or more beneficiaries (secondary). If the primary beneficiary is not found, the secondary beneficiary will receive the benefit after your death.
- In the event of your death, the beneficiaries will receive the death benefit that is tax-free. If no beneficiary is named in the policy, the life insurance policy will increase your estate size and also be subjected to estate taxes.
Updating information on life insurance beneficiaries
In the whole life of your insurance policy, you could experience changes that necessitate changing beneficiary information (like birth, marriage, divorce and adoption). It is very important to bring in the adjustments to your policy with the life changing experiences to keep the information accurate and up-to-date. Bringing in necessary changes to your beneficiaries is a simple process and is an important step to provide the people named as beneficiaries with the death benefit.