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What To Know About Life Insurance Beneficiaries

Many first-time life insurance buyers have life insurance beneficiary questions.

life insurance beneficiary

If you’re buying your insurance policy to financially protect your household but you’re not sure how your household will change over time, you should certainly look over your contract and understand the basics of how your death benefits work. Read also: Find Out How Much Coverage You Need with a Life Insurance Calculator.

Choosing A Beneficiary For Your Life Insurance Policy

Most life insurance policy buyers choose a spouse or children as their beneficiaries. Occasionally, a policyholder might change the named beneficiary on a policy. For instance, if children reach an age where they are financially stable or if the policyholder experiences a divorce, he or she would probably want to make some updates. This is typically an easy process for term, whole and universal life insurance policies and usually only requires a few phone calls and signatures from the insured and the new beneficiary.

Under the terms of some life insurance policies, you cannot change your beneficiary without your beneficiary’s permission. This special policy is known as an irrevocable benefit clause. Your policy probably won’t have this clause unless you’re buying life insurance to fulfill a contract or as part of a court order. Still, you should read your plan carefully to understand whether you can easily make changes to your policy. Read also: How to Find Affordable Life Insurance Quotes?

How Will Payouts Work?

One of the most common life insurance beneficiary questions that new policyholders have is how payments will work. In order to issue a payment, a life insurance company needs proof of death. A copy of the insured’s death certificate is usually sufficient.

State and federal laws prevent life insurance companies from demanding excessive proof of death or purposely delaying an insurance payout. After your life insurance beneficiary makes a claim, the insurance company only has a few weeks to make a payment. If the life insurance company refuses to pay a claim, it needs to give a valid reason that falls under the stated exclusions listed in a life insurance contract.

When you buy your life insurance policy, you should discuss the claims process with your beneficiaries. While this can be an uncomfortable conversation, keeping them informed of their rights and responsibilities will make claims easier after an unexpected death. Read also: Understanding the Need for Permanent Life Insurance.

Policy Options That Affect Death Benefit Payouts

Your beneficiary should also understand that there are a few optional terms that can affect payouts. If you purchase double indemnity coverage, for instance, your death benefit will double under certain circumstances. Your exclusions also affect your payouts greatly. Common exclusions include:

  • Suicide exclusions, which usually expire several years into your policy.
  • Undisclosed preexisting conditions exclusions, which also eventually expire.
  • Deaths resulting from excessively dangerous activities and hobbies.

Read your policy carefully to discover these terms and make sure to discuss them with your beneficiaries. Remember to look at several insurance quotes before purchasing a policy to find affordable premiums and acceptable policy terms. Read also: Why Life Insurance for Children is a Great Investment.

When you purchase your policy, you should also ask your provider any life insurance beneficiary questions to make sure that you understand how your plan works. Talk over the policy with your life insurance beneficiary and make sure they know the proper steps to take to ensure a timely payout. By taking a few simple early steps, you’ll get peace of mind and the knowledge that your beneficiaries are financially protected.


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