Life Insurance: a Guide to Beneficiaries

As is often the case with life insurance, until one considers buying a policy and really begins to think about it, the complexities of being sure you get exactly what you and your family need are virtually unknown. Even such an obvious aspect of life insurance as who the beneficiary will be in the event of your death is perhaps more complicated than one might initially expect. What follows is a simple guide to life insurance beneficiaries.

Perhaps the most common beneficiary in regards to life insurance is an individual such as a spouse. In such a case it is typical to name a 'primary' beneficiary who will receive the death benefits once life insurance is paid out, but often a 'contingent' beneficiary is also given in case the 'primary' cannot be found.

It is also quite typical to name two, or even more, beneficiaries instead of one 'primary'. This might be suitable in the case of the policy holder having two children where they will receive half of the death benefit each. In such a case it should be specified what will happen if one cannot be found by the insurer, for example will the remainder of the payout go to the one child or a 'contingent' beneficiary.

Trustees are another type of individual beneficiary who will be given the death benefit and will then be in charge of a trust that you have set up. They will then be in charge of using the money by the means you will have set out beforehand.

Beneficiaries do not just have to be individuals or family members, however. Alongside named trusts (as opposed to specific trustees) and charities, some purchasers of life insurance choose to name a business as the primary beneficiary. It should also be noted that there are no specific outlines for what a beneficiary can or cannot be, i.e. a named trust might relate to the upkeep of a memorial or gravesite, or the wellbeing of an animal or pet.

Perhaps the most important aspect to remember in terms of beneficiaries is that over a significant amount of time it is usual for these individuals and companies to change. Whereas, you may have one primary beneficiary at first, ten years down the line, the birth of a child may necessitate looking at your policy and re-clarifying who should receive the payout after your death.
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