Selecting your beneficiary is one of the most crucial steps in purchasing life insurance. As the individual who will receive the payout from your policy, your beneficiary is ultimately the reason you are purchasing life insurance in the first place.
Ask yourself: What do you want to happen to these funds after you pass away? Even if you’re single, buying life insurance still has benefits, and selecting your beneficiary requires careful thought.
Here are some pointers for selecting a life insurance beneficiary if you’re single.
What is a Life Insurance Beneficiary?
A life insurance beneficiary is a person or organization you designate to receive your policy payout in the event of your death. This person or organization can be a spouse, partner, child, parent, grandchild, sibling, or relative.
Why Select a Life Insurance Beneficiary?
You might choose a particular beneficiary for your life insurance policy for several reasons. For example:
- You may want to name someone who will be able to take care of your loved ones financially if you die prematurely.
- You may want to name someone who can manage your estate after you die.
- You may want to name a charity or other organization as the beneficiary of your policy to assist others in need.
How Do I Select a Life Insurance Beneficiary?
First, consider who is closest to you regarding your relationship and financial stability. Second, make sure the person you choose can handle receiving a large sum of money.
Finally, update your beneficiary information on your policy every year, so everyone knows who will receive your payout if something happens to you.
Why Choosing a Beneficiary is Crucial?
Choosing a beneficiary is more difficult when you are single because you don’t have a contingent beneficiary and need to choose one according to you.
If your child or spouse is the designated beneficiary on your life insurance policy, they will automatically receive the proceeds if you die. They will not have to go through complicated estate planning processes or worry about financial instability. Your beneficiary is supposed to:
- Pay Off Loans or Debt
If you have debts, you would like to pay before your death, naming a beneficiary on your life insurance policy can help expedite the process.
- Pay Off Funeral Expenses
Transferring the responsibility of paying off these expenses to someone else will free up some money for other expenses.
Typical Mistakes People Commit When Selecting a Life Insurance Beneficiary
life insurance beneficiaries should be specific about whom they want to benefit from their policy.
A beneficiary designation for a child:
unless the child is of legal age, they will not be able to receive the proceeds.
You should not specify your distribution method:
When naming numerous primary or secondary beneficiaries, the beneficiary will receive the proceeds in a lump sum or over time.
Establishing a taxable event by mistake:
naming a charity or non-profit organization as your life insurance beneficiary will make the donation tax-deductible.
Keeping your beneficiary information out of date:
beneficiaries should be updated annually so that your insurance policy remains valid and up to date.
When selecting a life insurance beneficiary, it is essential to be as specific as possible. This will allow your loved ones to know whom they should contact in the event of your death. Additionally, ensure that you designate an individual or organization that is important to you. Abbate Insurance is always ready to serve you with the best. Are you looking for life insurance? Contact us today to know your options.