Q & A: Life Insurance Beneficiary

UPDATED: Mar 26, 2020

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There are dozens of possible ways to choose a life insurance beneficiary. Most people use a simple strategy, such as selecting a spouse, parent or a trust. However, others may require something different entirely. Below are questions people often ask about selecting beneficiaries, making changes and more.

Q:  My situation has changed. Can I change my beneficiary after the policy is in force?
A:  Absolutely, as long as you are the policy owner. If so, you can change the beneficiary at any time with a simple form as long as the beneficiary is not irrevocable, in which case the beneficiary’s written consent would also be needed.

Q:  The application asks for the social security number of my beneficiary. I am not comfortable giving this, can I skip it?
A:  Most life insurance companies will waive this requirement. However, the social security number will help the company identify the beneficiary if a claim is ever made.

Q:  What happens if all of my beneficiaries die along with me? Will the life insurance company keep the money?
A:  No. If you don’t have a will or trust, the death benefit would likely be paid to your estate.

Q:  Can I name my best friend as my beneficiary?
A:  Not usually. However, if there is sufficient insurable interest on the part of your friend, it is possible. Insurable interest means the beneficiary would suffer a measurable financial loss if you were to die. Some situations where listing a friend may be appropriate would be if you shared a mortgage, or if the friend was dependent upon you financially in some way.

Q:  I am not married, and I have no children. Whom should I name as my beneficiary?
A:  In general, listing any family member is usually not a problem. You can always change your beneficiary later if/when you are married and/or have children. You can also list your estate as the beneficiary, however, be sure to talk to your financial advisor if estate taxes might be a concern. Putting together a trust to list as your beneficiary is another option.

Q:  A life insurance policy was court ordered due to my divorce. How can I be sure that my ex-spouse will not change the beneficiary?
A:  Only the policy owner can change the beneficiary. You can also make the beneficiary designation irrevocable. An irrevocable beneficiary can only be changed with the written consent of the policy owner and beneficiary. If the beneficiary is a child, consult your attorney about forming a trust or similar arrangement.

Q:  Can I name my minor child as a beneficiary?
A:  If a minor child is a beneficiary at the time of a death claim, the life insurance company will likely pay the death benefit to the minor’s legal guardian or to your estate, unless state law permits otherwise. If you are uncomfortable with this designation, visit with an estate attorney to form a trust to name as beneficiary.

Q:  What happens if I have two primary beneficiaries with a 50/50 split, and one dies with me in an accident? What happens to the remainder of the death benefit?
A:  In this case, the surviving primary beneficiary would receive 100% of the death benefit, unless specific instructions were given by the policy owner stating otherwise.

Q:  Why can’t I find where the life insurance company lists my beneficiaries in my policy?
A:  Most policies list the beneficiaries on the application copy, located in the back of the policy. The application copy is a part of your policy, including your beneficiary designations. If you want more, you may request a beneficiary confirmation letter from the company to keep with your policy.

Q:  I want to name a trust as my beneficiary, but it is not ready yet. Can I add it later?
A:  In most cases, yes. A few life insurance companies will require the trust to be completed before the insurance policy is placed in force. Check with your life insurance agent to be sure.

Q:  My bank is requiring a term life insurance policy because of a loan I took out from them. What is the best way to take care of this requirement?
A:  Once your new policy is in force, you can turn in a collateral assignment on the policy for the balance of the loan. The life insurance company can provide the forms to you. A collateral assignment provides the bank with a death benefit equal to the amount of the loan balance. Any death benefit more than the loan balance will be paid to your beneficiary.

Q: My beneficiary is living in another country and does not have a U.S. social security number. Can I still name her as my beneficiary?
A: In most cases, yes. If your beneficiary is living in a country that does not have relations with the U.S., it’s best to ask your life insurance agent to check with the life insurance company before applying.

Q: Can I name a charity as my beneficiary?
A: Sometimes. Most life insurance companies will allow this beneficiary designation as long as you have made regular donations to the charity and have kept records (via receipts or income tax returns). The company will likely have limits on the amount of coverage you can buy for this purpose.

Q:  Does my will supersede the beneficiary designations in my term life insurance policy?
A:  The life insurance company will pay out the death benefit proceeds to the beneficiary(s) named in the policy unless court ordered to pay the proceeds differently. If you ever change your will, be sure also to change your policy as well.

Your beneficiary designation will most likely be relatively simple. However, if you have unique circumstances or just don’t feel comfortable figuring this out on your own, let us know. We may recommend the help of an estate planning attorney if appropriate. Either way, you will be able to rest more comfortably knowing you’ve done all you can to protect your loved ones with term life insurance!

Tim Bain

Tim is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance. He writes and creates stuff for QuickQuote and other insurance and financial websites. You can find him on Twitter.

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