When purchasing a life insurance policy, it is important to have a beneficiary in mind who will receive your death benefit when you are gone.
Most commonly, a spouse or a child is named the beneficiary because life insurance is meant to protect your loved ones from financial hardship.
But did you know there are other options when it comes to beneficiaries you can choose from?
What is a beneficiary?
A beneficiary is a person, organization, or other entity you designate as the one to receive your death benefits or payout for the value of your life insurance policy.
You can name more than one beneficiary. If you do this, you have to designate the percentage of the policy you want to be assigned to that beneficiary.
For example, if you have a $100,000 life insurance policy and designate your three children as the beneficiaries, you can choose to divide the money equally by 33% per person.
Here are five other options the choose from if you are still thinking about who to name as your beneficiary on a life insurance policy.
Charity
Giving back to charity can be fulfilling. When it comes to life insurance, leaving your policy to a charity can be a choice to consider. Naming a charity as one of your beneficiaries can be a great way to leave your legacy to help out those less fortunate and also give charities the money they need to continue their work.
Trust
Setting up a trust can be a good financial tool. Leaving your life insurance to a trust can be a strategy to build generational wealth. This could be a good option if you have children and want to give them access to money later in life to ensure they do not spend it all at once.
It can also be a way to organize your estate and make sure the money you leave behind is managed by a trusted family member.
Contacting a financial advisor who is licensed can help to start the process of setting up a trust to be used as a beneficiary to your life insurance.
Business Partner
Purchasing a life insurance policy for your business can be a tool and strategy to keep your business open when a key employee is no longer there to operate the business.
If you own a business, it may be worth looking into getting a life insurance policy because it could prevent your business from falling into financial hardship now that an important employee is no longer available to work and generate income.
Friends and Family
Beneficiaries can be whoever you want. Sometimes, there are friends or other family members who are an influence in your life who may benefit from the life insurance death benefit when you are gone.
For example, siblings can be a good option if you do not have a spouse because they can use to money to help maintain their lifestyles. Maybe you have an elderly grandparent who needs assisted living. Life insurance can pay for those costs. What if you had a lifelong friend you knew could help you plan the funeral and also help maintain their lifestyle? Whoever it is, the people that impact our lives the most are worth considering when naming a beneficiary.
The Government
Finally, the government can be named as a beneficiary. While this is an unpopular beneficiary, it can be an option, especially if you owe outstanding debts and have a high amount of taxes to pay. It will lower the amount that your other beneficiaries get if you decide to name more than one, so work with a financial advisor to see if this is the right option for you.
Life insurance can be a valuable financial tool to set your beneficiaries up for the future, but if used correctly it can be a great investment. Contacting a licensed professional is the best way to start the process of enrolling in a policy today.