Beneficiary

From LoveToKnow Insurance

The term beneficiary is used to describe a person or entity who is designated to receive a death benefit from a life insurance policy. It may also be used to describe a person or persons with equitable ownership in trust assets. Learn more about beneficiaries and their designations here.

Beneficiary Designations

If you are getting ready to purchase a life insurance policy, one of the first things you need to do is determine who your beneficiaries will be. You will have to choose at least two people or legal entities/organizations and name them as follows:

Primary Beneficiaries
Contingent Beneficiaries

The person or persons listed as your primary beneficiary will receive the death benefits due to them from your life insurance policy and/or estate. If after your death, the primary beneficiary cannot be located, benefits will transfer to your contingent beneficiaries. If no beneficiaries can be located after your passing, your benefits will be paid to your estate.

Naming Beneficiaries

When naming your beneficiaries, you will want to be as precise as possible. List not only the relationship to the person or entity, but also their full legal name. For example, if your primary beneficiary will be your husband, list his full name, instead of spouse. This will prevent an ex-spouse from trying to claim the money.

If possible, also include the beneficiary's social security number. This will be of great help when it comes time for the life insurance company to locate the person who is to receive your death benefits. It could also save a great deal of confusion, because many people share the same legal name.

In addition to specifically naming your beneficiaries, you should also be explicit in your instructions as to how benefits should be divided. For example, if you have two beneficiaries, you will want to note whether or not the benefits are to be divided equally between them. You will also want to indicate what should happen is one of these beneficiaries is not alive to receive the benefits.

Updating Your Beneficiaries

Once you name your life insurance beneficiaries, you can typically change them or update their information at any time. In rare cases, the beneficiary may be irrevocable. Irrevocable beneficiaries cannot be changed without the express written permission of the beneficiary themselves.

If you want to see if your information can be changed, simply call you insurance company and make the request. Should the information be eligible for changes, they may have you fill out new paperwork or sign documentation so that everything is formally recorded in writing.

Common reasons for updating beneficiaries include:

A birth or adoption
A death in the family
Divorce
Marriage
A change of name
Address and telephone number changes

Keeping your beneficiaries updated is an important aspect of maintaining your life insurance policy. To make sure you stay on tops of things, it is a good idea to review your life insurance documents annually.

Claiming Death Benefits

If you are a beneficiary entitled to death benefits, you may need to file a claim with the life insurance company who administers the policy of the deceased. Though the claim filing process can vary from company to company, you will most likely be asked to fill out a claim form of some sort. You will also be asked to supply as much of the following information about the deceased as you can:

Full Name
Date of Death
Cause of Death
Life Insurance Policy Numbers

If you are a contingent beneficiary, you may be asked to supply a death certificate for the primary beneficiaries, as well as a death certificate for the owner of the life insurance policy.

The time it will take for you to receive the benefits will vary depending on the life insurance company. Often, it takes anywhere from 5 to 30 days. However, if your claim is contestable, there could be a waiting period that must be observed.