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Military Spouses & Dependents

Choosing a Beneficiary for Life Insurance


Life insurance policies allow you to continue to provide for your loved ones after you have passed away, but who should be the beneficiary of your policy? Choosing a beneficiary may seem simple enough, but there are some aspects you should stop and consider before making a concrete decision.

Telling Your Beneficiary About Your Policy

It should also be noted that if someone does not know they are a life insurance beneficiary, they may be harder to track down after you pass. If the insurance carrier is unsuccessful in locating your beneficiaries, the payout may also be given to your state's unclaimed property department.

You purchased a life insurance policy to protect your family, cover your funeral expenses, or leave a legacy in your name — not to have your earnings given to a probate court or an unclaimed property program. This is why choosing a beneficiary is so important and is time-sensitive regardless of your age.

What Are the Differing Types of Life Insurance Beneficiaries?

It is typical for a life insurance policy to have a primary and a secondary beneficiary or multiple primary beneficiaries listed. The people or organizations you list on your policy will be the recipients of your death benefit payout after you have passed away.

The primary beneficiary is the person, persons, or organization/trust who will receive the insurance payout first. Secondary beneficiaries will receive your life insurance payout only if the primary beneficiary passes away before they receive the money. It is common for policyholders to choose their spouse or partner as their primary beneficiary, and their children as secondary beneficiaries. As stated previously, you may choose multiple primary beneficiaries if you wish to have your death payout split up amongst your family.

Common Ways to Choose a Beneficiary

The most commonly chosen beneficiaries in a policyholder's life are typically a spouse or domestic partner, parents, children, siblings, or business partners. Most Americans with life insurance say they purchased their policy to provide for future generations, and have their children as their primary beneficiaries.

If a policyholder wishes for their payout to be distributed among several people, they may choose multiple beneficiaries and have their death benefit broken up between them. This method is typical among people with multiple adult children and a spouse to protect financially.

What If I Don't Choose a Life Insurance Beneficiary?

Your insurance provider should help you choose a beneficiary for your life insurance policy at the time of purchase, but in the case that you end up outliving your listed beneficiaries, you will need to amend the life insurance policy to choose someone else. The primary benefit of life insurance is the benefit passes to the beneficiary tax-free outside of the estate, hence the importance of naming a beneficiary. If you do not list any beneficiaries, the death benefit will become part of your estate, subject to additional costs, fees or taxes, and will be used to pay off any remaining debts before being distributed by your state’s probate court.

What Should I Consider Before Choosing a Beneficiary for Life Insurance?

It would help to consider several factors before jotting a name down on the dotted line when choosing a beneficiary. Ask yourself questions such as:

  • Who needs your death benefit the most?
  • What financial responsibilities matter the most to you and your family?

The most efficient way to choose a beneficiary is to ask yourself why you wanted a life insurance policy in the first place. Is it to provide for the loss of income to your family? Is it to give your children a nest egg to fall back on? Whatever the reason, be sure it’s taken into account as you make your decision.

Which Rules Should I Be Aware of Before Choosing a Beneficiary?

You and your insurance provider should consider a few rules and laws before you finish writing up your life insurance policy. First, does your local state law dictate that your spouse should have a partial claim to your death benefit, despite not being the listed beneficiary?

Specific state regulations say a spouse is entitled to a portion of a death benefit, even if they are not the listed benefactor. This may raise an issue if you are separated from your spouse but not officially divorced, or if you wish for your total benefit to go to your child or an organization or trust.

If you are purchasing your life insurance to provide money for the rearing of your children or grandchildren, it should be noted that minors cannot be beneficiaries. If your children are under 18-years-old, the beneficiary would need to be a trusted guardian of them.

There is also the option of setting up a trust for your children and making that trust your life insurance beneficiary. Your children would have to wait until they were 18 to access the trust, but the nest egg you provide would be ready for them once they come of age.

Contact AAFMAA to Learn More

To learn more about choosing a beneficiary for life insurance, contact the AAFMAA Life Insurance team online or call 877-398-2263 today.