Life Insurance: What is a beneficiary
The beneficiary or beneficiaries of a life insurance policy are the person or persons who receive a death benefit after the insured dies. Often, the beneficiary is a spouse or offspring, but sometimes it is a more distant relative or even an estate. There are 9 common property states in which dictate that your benefit goes to your spouse, unless she/he waives that right (common property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin). If you live in a common property state, you’ll have to have this person waive their rights if you prefer that the benefit goes to another person.
A child can be a beneficiary but they will not be paid out until they are 18 at minimum, and with some policies they can’t access funds until they are 21 years old. Another option is to leave the funds to a legal guardian that you trust. Remember that with a term life insurance policy, your beneficiary will only be paid out if you die within the specified term in your contract.
It’s also a good idea to always have a life insurance contingent beneficiary in case something happens to a beneficiary. If this were to happen, the funds would skip over the primary beneficiary and go directly to the contingent beneficiary. You can always make changes and change your beneficiary/beneficiaries at any time.
If you don’t choose a beneficiary to your policy or something happens to both your primary beneficiary and contingent beneficiary, your life insurance policy goes into estate probate and, after your debts are cleared, it is divided amongst those the court decides are the rightful recipients.
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