A life insurance beneficiary is a person whom you have named in your life insurance policy to receive the death benefit if you die.
How to Choose Your Life Insurance Beneficiary: Revocable or Irrevocable
Life Insurance is designed to financially protect your family or the people you care about. As insurance brokers, we meet with people every day to discuss protecting assets and planning for their financial future. When it comes to life insurance, aside from choosing the type of life insurance that works best, you also have to choose a beneficiary.
Three Kinds of Beneficiary
- Revocable beneficiary – When the named beneficiary can be changed and you do not require their consent.
- Irrevocable beneficiary– When the named beneficiary can not be changed without consent of the beneficiary.
- Contingent beneficiary – Your beneficiary backup. The contingent beneficiary is only eligible for the death benefit if the primary beneficiary is no longer alive.
What You Need to Know About Choosing a Beneficiary for Your Life Insurance
If you have purchased life insurance or are in the process of choosing a policy, there’s a good chance that you already have someone in mind to leave the death benefit or money. This is usually the easy part. The difficult part of choosing the beneficiary is understanding how the payment of the death benefit will play out in the event of your death and planning for contingencies over the term of the policy.
Revocable vs. Irrevocable Beneficiary
Often people who are in committed relationships choose to make their beneficiary irrevocable because they feel very strongly that no matter what happens they would never want to change who gets the money. Newlyweds or new parents might choose irrevocable beneficiaries. However this type of beneficiary can be dangerous.
In today’s changing society and with so many factors influencing our lives, the reality is that things happen, people get divorced, they get remarried, and situations come up. The last thing you want to do is set a beneficiary to irrevocable and then find yourself in a situation where you want to change the beneficiary and can not do so without their consent.
Selecting a Revocable Beneficiary Protects Your Freedom
Revocable beneficiaries can be changed by the policy holder of a life insurance policy at any time. This allows you to change who the death benefit will be paid to as your life situation changes.
Can There Be More Than One Beneficiary on a Life Insurance Policy?
You can name more than one beneficiary in your life insurance policy. In fact, it is recommended that you name a primary beneficiary and a contingent beneficiary so that in the event of your death, if the primary beneficiary is no longer alive, your money will go to someone whom you have designated.
Contact us for a free consultation on life insurance. We would be happy to answer any questions you may have.