Who Should Be Your Life Insurance Beneficiaries

Life Insurance Beneficiaries

What are the biggest mistakes people make with life insurance?

While delaying the purchase of a life insurance policy and buying too little coverage are very common errors, there’s another area in which consumers all too often make mistakes: choosing their insurance beneficiary. It might seem like a pretty straightforward decision (you pick your closest loved one, right?), but making the wrong choice now can create problems for the people you leave behind. Experts suggest you avoid the following blunders.

Don’t choose a minor. Life insurance companies are unable to pay the proceeds of your policy to anyone under the age of 18. Instead, set up a trust as the beneficiary of the policy or name a trusted adult as the custodian of your life insurance benefits. Your estate attorney can provide you with further insight into this process.

Don’t choose a disabled or special needs dependent. If you name someone as your beneficiary who relies on Supplemental Security Income and Medicaid, you may disqualify them from receiving those benefits under federal law. Instead, set up a trust and name it as the beneficiary. Appoint a trustee to manage the money for your disabled or special needs dependent’s benefit.

Don’t name only a primary beneficiary. Many people name their spouse as their primary beneficiary and neglect naming a secondary. But what happens if you’re in an accident and die at the same time? Advisors often recommend naming secondary and final beneficiaries to ensure your insurance benefits go where you intend without languishing in probate or becoming vulnerable to creditors.

Don’t choose someone you don’t actually want to inherit your death benefit. Some consumers make the mistake of believing their will can override their life insurance policy. As such, they may fail to update the beneficiary when their circumstances change. However, regardless of what a will says, insurance companies always pay to the listed beneficiary—even if it’s your ex-spouse.

Don’t be vague in your selection. It might seem like common sense, but some consumers don’t realize they need to be specific when naming their life insurance beneficiary. Instead of noting “my wife,” or “my granddaughter” or “my children,” on the policy, include a full name (or names), social security numbers and—whenever possible—current addresses. If you’ve named multiple beneficiaries, you much also state how you’d like the money divided.

Don’t keep your beneficiary in the dark. If no one knows you have a life insurance policy, how will anyone know what to do to claim the benefit after your death? Make sure at least one person in your family knows where you keep the policy document, who you have named as the beneficiary, and what to do to start the claims process after you’ve passed on.

If you’d like to discuss the finer details of choosing a life insurance policy beneficiary, please contact us. We’re always here to help with all of your life insurance needs.

Talk to a Professional Before You Buy Insurance Online

Talk to a Professional Before You Buy Insurance Online

These days you can buy just about anything online—and many of us do so with gusto.  According to one e-commerce market forecast, experts predict the number of U.S. online shoppers will grow to 175 million by 2016. While many are purchasing airline tickets, books, movies, electronics, clothing and home goods, some are buying financial products—including life insurance. But before you join them, consider these reasons to talk to your insurance professional first.

The Choices are Complex

In general, life insurance comes in two basic forms: whole life and term. Insurers sometimes refer to whole life policies as “permanent insurance” because they combine insurance coverage with an investment fund. The policy will pay your beneficiaries a fixed amount when you die, but part of your premium will also go into investments that can build cash value. You can then borrow against the cash accumulated in the investment fund.

Term insurance is a life insurance policy without the investment component. When you purchase term insurance, you’re buying coverage for a set period of time. Some term policies renew annually, and their premiums will steadily increase along with your age. Other term policies have fixed premiums for anywhere from five to 30 years.

But your options don’t stop there. Universal life is term insurance combined with a money-market investment that pays a market rate of return. Variable life and variable universal life combine an insurance policy with investment funds tied to stocks or bonds.

The Right One Depends on Many Factors

Picking the right insurance product for your needs requires you to consider a number of factors. You’ll need to determine the amount of coverage you want to buy, the maximum premium you can afford, your age, the ages of your beneficiaries, and more. Unfortunately, this process is more complex than what most online computer models can handle—which means you’re likely to find one-size-fits-all policies that are too big or too small but never just right.

For a policy tailored to your precise needs, one that integrates with your overall financial plan, your local insurance agent is really the only option. Not only will you find the best selection of products (online clearing houses often offer term life insurance alone), but you’ll also benefit from your agent’s training and expertise. This means he’ll help you avoid buying too much coverage or a policy you don’t need and can even create a custom blended package using more than one type of life insurance product.

The Internet is definitely convenient, and you can use it to explore your insurance options ahead of time—as you might when buying a car. But when it comes to making a final selection and submitting an application, talk to your  insurance professional first.