According to our friends over at National Life, a beneficiary is the person or persons designated by the policyholder to receive the proceeds of an insurance policy upon the death of the insured.
What this basically means to that when you purchase a life insurance policy that you are also going to choose a person you want the money to go to when you pass away. This person is your beneficiary.
What if you want to leave the money to more than one person or maybe even to a charitable organization. How would that work out? Lets say you want to leave 1/3 to your spouse, 1/3 to you grandchildren, and 1/3 to your favorite charitable organization. All three would be considered equal beneficiaries each receiving 1/3 of the benefit.
Lets take a quick look at a more complicated setup! Lets say you want to leave all the money in your policy to your spouse but in the event that your spouse is not alive then you want the money to go to your children. In this scenario your spouse would be considered the primary beneficiary and your children would be considered the contingent beneficiaries.
There are endless possibilities to how the beneficiaries of your policy can be set up. Knowing how beneficiaries work is crucial to achieving your estate planning goals. Just as important as knowing how beneficiaries work is making sure your beneficiaries are kept up to date. Make sure your beneficiaries are up to date during your next policy review.
-Daniel
Thanks for the reminder Daniel! It’s a great reminder to me also to do a will!