What is a Life Insurance Beneficiary and How to Choose Yours

What is a beneficiary?

When you designate a beneficiary for your life insurance policy, you’re letting the insurance company know where the policy benefit goes after the insured person’s death.

You can have more than one beneficiary, and your beneficiary doesn’t have to be a person. Trusts, charities, and corporations (if the policyholder is the owner of the corporation) are also eligible to be beneficiaries.

You can designate one primary beneficiary, multiple primary beneficiaries, and/or contingent beneficiaries to receive the money. A contingent beneficiary will be used if the primary beneficiary passes away before the insured, if they can’t be located, or if they refuse the benefit. A contingent beneficiary is essentially a back-up.

If you decide to have more than one primary beneficiary, you can choose to either give them an equal share of the benefit or you can designate a specific percentage to each. For example, this may be helpful if you wanted to provide your spouse with most of the benefit but would also like to use your policy to continue to help your parents financially.

Here are a few examples of how beneficiaries can be listed on a policy.

Type	Example of Wording to Use
One primary beneficiary	Mary E. Doe, Wife
Two primary beneficiaries with equal share	John J. Doe, Father Jane J. Doe, Mother
Two primary beneficiaries with unequal shares	75% to Mary E. Doe, Wife 25% to Jane J. Doe, Mother
One primary beneficiary and one contingent beneficiary	Primary – Mary E. Done, Wife Contingent – Jane J. Doe, Mother
One primary beneficiary and two contingent beneficiaries	Primary – Mary E. Doe, Wife Contingent – 75% to Jane J. Doe, Mother; 25% to James H. Doe, Brother
One primary beneficiary and contingent beneficiaries (with equal share)	Primary – Mary E. Doe, Wife Contingent – Sam M. Doe, Son; Susan B. Doe, Daughter; Adam P. Doe, Son; Ann R. Doe, Daughter
Insured’s Estate	Estate of the Insured

How to choose your beneficiary

No one likes to think about what will happen when they’re gone, but when choosing life insurance, it’s important to take the time to think about who will be most impacted by your death. Do you have a spouse and/or child who depend on your paycheck? Have you been paying medical bills for your parents? Do you have outstanding debts your spouse or family will be required to pay from your estate?

Taking the time to determine who would be most impacted financially from your death can help you make decisions. If you live in a state where your spouse would be required to pay any outstanding debts, like student loans, or will be responsible for the mortgage, you may want to allocate more funds for him or her. Some states will require that you name your spouse as your only primary beneficiary.

Choosing a Minor Child as a Beneficiary

A minor child can be listed as a beneficiary, but if they are a minor when the policyholder passes away, they may not receive the benefit until they come of age, which differs by state. If you think your insurance policy would be used to help pay for final expenses, you may want to consider not naming a minor as a beneficiary since this may delay the payment while appropriate legal guardians entitled to receive the money are identified. Rules vary by state, but the company could either pay a court-appointed guardian or create a Uniform Transfer to Minors Act affidavit to pay a portion to a UTMA guardian (up to the UTMA limit defined by the state), but you should confirm with your account manager.

Make sure to keep your beneficiaries updated, especially if your beneficiary has passed away or is an ex-spouse. Or, you may have purchased the policy when you were a new hire and single, and listed your parents as the beneficiary, but now you’re married with kids. If so, you may want to update the beneficiary to your spouse or children.

If you have an American Fidelity life insurance policy and you need to make a change outside of enrollment, you can fill out the Beneficiary Change form. The form requires a witness signature to complete.

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