It is incredibly common when you first purchase your term life insurance policy to list a beneficiary without giving it too much thought. This is why we encourage our clients to take a second look at their policies, especially if it’s been a few years or if you’ve had any major life changes since you first applied.
Your policy’s beneficiary designation determines who receives the death benefit if something happens to you. This small detail in your policy carries a lot of weight—fortunately, it’s easy to update. Here are a few things you should know:
Primary vs. Contingent Beneficiaries
You are allowed to name more than one beneficiary, and it’s a good idea to do so.
- Primary beneficiary: The person (or people) who would receive the policy’s payout first.
- Contingent beneficiary: The backup, or someone who would receive the death benefit only if the primary beneficiary has also passed away or cannot accept the funds.
Many people list a spouse or partner as their primary beneficiary and children or siblings as contingent beneficiaries. You can divide the benefit by percentage or list individuals equally. The most important thing is clarity.
What If You Have Minor Children?
Life insurance proceeds can’t be paid directly to a minor. If your children are under 18, you’ll need to take an extra step to avoid probate or legal confusion.
Your options typically include:
- Naming a trusted adult as the beneficiary on their behalf
- Establishing a trust and naming the trust as the beneficiary
- Naming a legal guardian for your children’s inheritance
This is a great topic to discuss with an estate planning attorney if you’re unsure how you’d like to handle it.
What About Ex-Spouses?
In some cases—especially after a divorce—your policy might be legally required to list your ex-spouse as a beneficiary. This is common when alimony or child support is involved.
If that’s not the case for you and you’ve since remarried, now is the time to double-check your designations. Life insurance doesn’t automatically update based on your current relationship status. If your ex is still listed, they’ll still receive the benefit unless you make a change.
Keep It Current After Life Changes
We recommend reviewing your beneficiary information any time there’s a major change in your life, such as:
- Getting married or divorced
- Having a child or adopting
- Becoming a stepparent or guardian
- Experiencing the death of a loved one
- Creating or updating a will or trust
Updating your beneficiaries is usually as simple as completing a short form with your insurer, and we can help walk you through it.
A Quick Review Goes a Long Way
Setting up the right beneficiaries is one of the easiest ways to make sure your term life insurance works the way you intend it to.
Not sure if your beneficiary setup is current? We’re happy to help you review it and talk through any updates that might make sense for your situation.
