A life insurance beneficiary is the person you name in your life insurance policy as the person who gets the proceeds of your insurance policy in the case of your death or illness. In a lot of cases, you might find that people undertaking a life insurance policy don't give much consideration to the beneficiaries that they name on their policies. They usually simply prefer to name a spouse or their children as the beneficiaries. But it is to be kept in mind that selecting your beneficiary is very crucial and you should keep certain things in mind while choosing the inheritor.
Life insurance proceeds are usually paid immediately to the beneficiary upon the demise of the policy holder. But if you name say something like your estate as your beneficiary it would mean that your money would go into the process of probate which is usually a long and lengthy process that would mean unnecessary wastage of money too.
While mentioning your beneficiary, it is important to define his or her designation the policy very well. If you do not word your beneficiary's designation properly, it might have disastrous results on how your policy proceeds are distributed.
If you are writing your spouse's name as your life insurance beneficiary, don't mention the designation as just a husband or wife. This could lead to an ex husband or wife receiving the proceeds from your policy by mistake. In case you are a divorcee, it is important to mention the designation of your current wife or husband correctly to ensure proper proceedings of the insurance money takes place.
If you wish to name your children as your life insurance beneficiary you might be leaving out any later born child from the coverage of insurance. In such a case, make sure you change your policies designation status.
There are certain things that you should keep in mind while wording your beneficiary's designation. Just mentioning children of the insured can lead to exclusion of a child from your spouse's previous marriage from the coverage. At the same time, simply stating children born of marriage can lead to expulsion from coverage any adopted child that you might have.
Also, naming a secondary life insurance beneficiary is probably a good idea. This secondary beneficiary is like a contingent plan in case the primary beneficiary is no longer available to avail the proceeds.
A large number of people actually prefer to name a guardian or a trustee as the life insurance beneficiary for their insurance money rather than naming the children themselves while they are minors. This means in case of the policy holder's demise, the assets and the insurance money will be entrusted with the guardian of the children till they come of age.
Many people are including the names of their grandchildren in their policies as their beneficiaries. The thing to be made clear in such a case is whether the grandchildren would receive an equal amount or they would split the amount the parents would have received. As a policy holder, it is best to always plan for all kinds of contingency in the future and safeguard your family and loved ones against a bleak financial future through a well defined and created life insurance policy.