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Life insurance beneficiaries: Who gets what, and when?

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By McKenzy Bowers | May 15, 2019

There are plenty of terms and acronyms used in the life insurance industry and it can make life insurance confusing and convoluted. And beneficiary or bene, as it’s often referred, is definitely one of those terms.

While you can decide how many primary and contingent beneficiaries you want, it’s important to take a moment to learn more about how your primary, and contingent beneficiaries, can impact your life insurance plans.

Contingent Beneficiary

A contingent beneficiary is basically the back-up plan. The contingent beneficiary stands-by in the event the primary beneficiary is either no longer alive, or unable or unwilling to accept the benefit.

Quite simply, a contingent beneficiary is someone you name that will receive the policy’s death benefit should your primary beneficiary die first. For example, should Jane Doe (my wife and primary beneficiary) die first, the benefits should be paid to my son, James Smith and my daughter Jane Smith in equal shares. And because you are clearly stating your wishes, there is no room for uncertainty.

Finally, should no living beneficiary be found, any death benefit would be paid to the insured’s estate, and would then be part of the probated portion of the estate (more fees, lawyers, delays, court procedures, etc.).

Primary Beneficiary

A primary beneficiary is the first in line to receive the death benefit from your life insurance policy. In cases where the primary beneficiary is unable to receive the funds, a contingent beneficiary of your choosing will step in to receive the death benefit.

As a matter of fact, when applying for life insurance, the agent will ask about your beneficiaries. The most common arrangement is spouse as primary, children equally as contingent. You have a lot of choices, and depending on your situation, you may want to name someone like:  parents, siblings, extended family, a close friend, current partner, or even an organization (your church, favorite charity, etc.) in need of support.

You can also name a trust you’ve set-up. Just know, if you name a trust as your beneficiary, the trust can distribute the proceeds as per its terms. This way, you can spread out the benefit over time, and you can control who gets what, and when, well into the future.

Multiple Beneficiaries

There’s no shortage of options here. You can divide up the death benefit in any way, for example, for your primary beneficiary category, your partner can receive 50% of the benefit then the children can split the other 50% equally.  The death benefit can be split any way you see fit and, you can change it at any time prior to your death.

To make changes to a primary or contingent beneficiary, contact the insurance carrier or your life insurance agent, who will provide you with a beneficiary change form. Many companies nowadays even do these changes through online platforms.  Your agent acts as your life insurance concierge and will help guide you through whatever is necessary.  Beneficiary changes are relatively easy to do though.

Keep your beneficiaries in the know

In addition to regularly reviewing your life insurance policy for accuracy, it’s also important to let your beneficiaries know that you’ve chosen them to be your beneficiary – primary or contingent. Your beneficiaries should have details of your wishes, as it is up to the beneficiary to claim the death benefit when the time comes.

Now call us at 800-496-9083 and speak to a real person! (yes, we’re old school.) You have enough things to think about, so we’ve taken the stress out of shopping for life insurance.

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