Life insurance is still one of the single most important coverage policies out there, but many people are still turned off by what they perceive as “gray areas.” Specifically, a lot of potential buyers want to know more information about the beneficiary aspect of life insurance because it’s an area that generates a lot of confusion.
Basically, a beneficiary is the person that will receive the buyout of your coverage after you pass away, but is isn’t always that easy. Here are some frequently asked questions about beneficiaries courtesy of your life insurance company.
1. Do I have to designate a beneficiary?
Yes, absolutely. Without a beneficiary, your life insurance company will not know who to pay the proceeds of your coverage to.
2. What if I have a will? Do I still need a beneficiary?
It is recommended that, even with a will, you still designate your policy to a beneficiary. If you want the payout of your life insurance to go to someone other than your estate, you can make this happen. In the end, naming a specific beneficiary to receive your payout instead of simply leaving it in your will eliminates any gray areas and ambiguity.
3. Who can be a beneficiary?
Anyone you like! Normally, beneficiaries are immediate family members but they can be relatives and even close friends. It is possible to leave your buyout to your estate, but your buyout will take longer to reach whoever receives because of all of the legal steps in between.