If you already have a life insurance policy, there is no doubt that you feel peace of mind and comfort that your loved ones will be taking care of if something happens to you. However, big mistakes can be made if you consider the most common types of life insurance blunders.
The most common mistake seen by financial planners in the industry today are buying not enough insurance and buying too much insurance, but one of the biggest mistakes you can make is in not updating your beneficiary designation forms. Selecting a life insurance policy is an important way to pass on assets in a relatively fast manner to future generations.
Life insurance proceeds pass directly outside of probate because they are managed by the life insurance company and not through the courts. However, if you have not updated your beneficiary designation forms, these supersede anything listed in your will and this means that the life insurance company is responsible only for distributing proceeds to those listed on your beneficiary forms.
If you recently got divorced and failed to update your forms to take your former spouse’s name off of there or failed to include a split to be intended for your more recent child or grandchild, this could put your loved ones in a very difficult situation after you pass away.
Many people don’t realize that these beneficiary designation forms are filed and stored by the company until you update them. If you’d failed to contact the company and ask for information about updating your beneficiary forms, details that you place inside your will, will not be included. Make sure you schedule a consultation with an estate planning attorney and talk about how a life insurance policy fits into the bigger picture of your financial planning and estate planning goals.