How to properly choose life insurance beneficiaries

Do you want to take out a life policy? If so, in addition to comparing different options, one of the most important questions will be deciding who your beneficiaries will be. These will be the people who, after your death, will be able to collect the sum insured. In this new article we share some recommendations to choose, in an appropriate way, the beneficiaries of your life insurance .

Who are the beneficiaries of life insurance?

Regardless of the type of life insurance contracted, they all have something in common: the payment of an indemnity when one of the claims stipulated in the policy occurs (death, disability, serious illness, etc.). The people who will receive this benefit are known as “beneficiaries”. In other words, a beneficiary is the person or persons who are entitled to receive the compensation provided for in the general conditions of the life policy. The person who appoints them is the policy holder, who usually does so based on family ties (children, spouse, siblings, descendants…). However, the existence of a degree of familiarity is not mandatory when choosing the beneficiaries.

Tips for designating life insurance beneficiaries

Now that you know who the beneficiaries of a life insurance are, here are some tips to designate them without problems.

Clearly express who your beneficiaries will be

Being transparent, clear and honest is the best way to avoid tensions between successors. In addition, it will be a good way to simplify the procedures for the beneficiaries, when they need to prove to the insurer that they are entitled to receive the compensation.

Choose more than one beneficiary

This is a recommendation in case the beneficiary and policyholder die at the same time. Therefore, it is convenient that secondary and tertiary beneficiaries exist. Let’s see what we mean by each of them. Secondary beneficiaries will receive the compensation in the event that the primary beneficiary is unable to collect the compensation. They are also known as second-line beneficiaries. On the other hand, we have the tertiary beneficiaries, who, in extraordinary cases, can receive compensation if both the primary and secondary beneficiaries die.

Take precautions if the beneficiary is a minor

Sometimes, taking out a life policy is done so that the children are not left unprotected and certain expenses are covered. However, a minor cannot collect a life insurance claim directly. For this reason, it is advisable to leave the money in the charge of a trust fund and let the manager deliver it. Otherwise, it will be up to the court to appoint a manager, which could take time and significantly delay the delivery of the money.

Use appropriate language

Speaking of “descendants” or “heirs” can be a very broad way of designating the beneficiaries. For this reason, make sure to be very specific and name them by name and surname. Also, it is appropriate to detail the percentage of compensation to which each is entitled.

Study the economic situation of your beneficiaries

It is important to assess whether family members could have financial problems in the future. If loved ones already have some assets to face possible difficulties, it may be interesting to allocate the money to non-profit institutions or organizations.

Review your insurance policy regularly

As long as an irrevocable beneficiary has not been named, it will be possible to change beneficiaries at any time while the policy is in force. It may be necessary to include a newly born child or, after a separation, to exclude the ex-partner as a beneficiary of the policy. The policyholder is always free to make changes. Likewise, in the event that the insured person dies without having named their beneficiaries, the distribution of the compensation will be made among the direct descendants or family members listed in the will. The distribution of the money will be done equitably. There are many doubts about the designation of the beneficiaries of a life insurance. If you have questions about how to get the best life insurance, contact our expert advisors and decide if this is the best product for you and your loved ones.