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How do I name or change a life insurance beneficiary?

By Posted : December 4, 2019

Naming a beneficiary is a crucial part of the life insurance process.

If you fail to name a beneficiary and you die, the life insurance policy typically becomes part of your estate and is subject to probate. There are several factors to take into account.

Here are must-know tips for naming a beneficiary:

  1. Details count -- You should spell out the names of all of your beneficiaries. Provide your agent with their Social Security numbers to facilitate benefit payouts should you die. You should also designate how you want the money distributed if there is more than one beneficiary.
  2. Consider naming primary, secondary and final beneficiaries. That way, if your primary beneficiary dies before you do, or at the same time, the money will go to your secondary beneficiary. If your secondary beneficiary is no longer alive, the money will go to the final beneficiary.
  3. Update -- Don't forget to update your beneficiary list if you experience a life-changing event, such as a divorce or the birth of children. Contact your life insurance agent or insurer should you want to change a beneficiary.
  4. Children can't receive death benefits directly -- Be aware that life insurance companies won't pay benefits directly to children. If you name a child under age 18 as a beneficiary, you should make arrangements for how the money will be managed through a trust or other legal provision.
  5. Payout can affect benefits -- Dependents who receive Supplemental Security Income and Medicaid could become ineligible for assistance if they receive a large financial inheritance. Be careful about naming them as life insurance beneficiaries.
  6. Community-property states -- In states with community-property laws, your spouse would have to waive the right to your life insurance proceeds even if you named someone else as a beneficiary. Check with your insurance agent to learn the details.

Here are the community-property states:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Also, in Alaska, South Dakota and Tennessee, you can opt in to community-property laws. Opting in can affect your rights involving your spouse, including if you get divorced. So, make sure to understand those issues before signing up in those states. 

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