Navigating Term Life Insurance for Blended Families: Making Beneficiaries Clear and Fair
Blended families can bring a lot of joy to your life, and can also create a little complexity when it comes to financial planning. If you’re remarried, co-parenting or supporting children from more than one household, it’s worth taking a closer look at how your term life insurance policy is set up.
One of the most important details is who you list as both your primary and contingent beneficiary(s). This is a simple step that plays a big role in making sure the people who financially depend on you are protected the way you intend in the event of your premature passing.
Here are a few things to keep in mind.
Start with who depends on you financially
The first question to ask yourself is: who would be affected financially if something happened to me? This could include:
- Your current spouse or partner
- Children and/or stepchildren
- An ex-spouse (especially if there’s legal obligation in place)
Term life insurance is a great option for blended families because it can be tailored to reflect your real life and relationships.
Be specific when listing beneficiaries
When listing your beneficiaries, you need to be as clear as possible. Instead of using general terms like “my children,” name each beneficiary individually. This is especially beneficial if you’d like to include stepchildren, who aren’t automatically covered unless legally adopted.
You can also choose how the benefit is divided, either equally or by percentage. For example:
- 50% to your current spouse
- 25% to each of your two children
There is not a right or wrong way to do this; the most important thing is making your intentions as clear as possible.
You may also want to consult with an estate planning attorney to consider creating a revocable living trust and then naming this trust as your beneficiary.
Include Contingent Beneficiaries
A contingent beneficiary is someone who would receive the death benefit if your primary beneficiary is not able to. For example, you could name your spouse as the primary beneficiary and your children as contingent beneficiaries. This isn’t a requirement, but it is a helpful way to make sure your coverage aligns with your financial goals.
Keep your policy in sync with any legal agreements
Some divorce decrees require you hold a life insurance policy naming your ex-spouse as a beneficiary to cover child support, alimony or other shared financial responsibilities. This is a common way to make sure financial obligations are covered without impacting your current household financially. Keep in mind you do not necessarily need separate policies to make sure everyone is covered as you can designate multiple primary and contingent beneficiaries on one policy.
Review your policy when life changes
The people who rely on you and the roles they play can shift over time. When this happens, we recommend reviewing your beneficiaries any time something major changes, like:
- Getting married or divorced
- Welcoming a new child or stepchild
- A child reaching financial independence
Updating a beneficiary on your term life insurance policy is quick and easy—it just takes a little attention to stay aligned with your financial priorities.
Keeping things simple and clear for your family
Blended families often have more moving parts, which is why a little clarity goes a long way with your term life insurance policy.
If you’re not sure how to structure your beneficiary designations, or you just want to talk through a few options, our team is here to help.
