The main reason for investing in a life insurance policy is to provide protection for your loved ones after you pass away, but you get to decide who is named as the beneficiary on these life insurance policies.
A good rule of thumb to help you figure out this process is to consider the person or people who would be most impacted financially if you passed away. This situation can be complicated, however, if you have multiple people in your life who might have co-signed on things like mortgages or loans. They may rely on you financially or could be involved in raising your child.
The beneficiary is the person who will receive the payoff from a life insurance policy if you pass away. This money can be used for any financial needs that the beneficiary determines are appropriate including end of life expenses, funeral arrangements, and other day-to-day bills, such as child care or mortgage. You can name two or more individuals as beneficiaries, which is strongly recommended if you have more than one person who might be impacted by your death, financially.
The primary person would be known as the primary beneficiary, but you can determine the percentage of the policy payout that each person would be given by using a contingent beneficiary, who receives the death benefit if something happened to the primary.
Life insurance might be the major safety net for your loved ones if you are no longer around, but who you name as a beneficiary is unique to your individual circumstances. If you provide support to your parents, if you owe someone or have them co-signed on a loan or if your partner would not be able to pay the mortgage or bills without your support, all of this information should be included in the process of deciding who should be named as your life insurance beneficiary.
Need help understanding different estate tools? Contact our Pasadena estate planning law firm today.