What you need to know about beneficiary clauses

Tuesday, February 2, 2010

When you set up a life insurance policy, the most important part that establishes who your policy gets paid to and when it will get paid is set out in the beneficiary clauses. The entire goal of a life insurance policy is to pass on some wealth to your survivors after you die and therefore it is only natural that you need to identify who these people are on your policy.

It is most common place that people will name their spouse, children or other relatives as their beneficiaries and in order to for them to see the maximum amount set out in the policy, it is critical that you outline this. In the event that you don’t establish this, the amount will be lumped in with your estate and will be subject to settlement fees. It is also very important to name primary as well as contingent beneficiaries. This means that if your spouse was to die with you, or within a stipulated amount of days after you, then your assets will be passed on with the greatest ease.

As you carry on living within the term of your insurance policy, it is only natural that during the term, your situational status will change. Whether it be marriage, divorce or the birth or death of a child, it is important that your policy continually reflects these changes. You will be able to change the beneficiaries on your policy and it is imperative that you do so.

If you don’t name beneficiaries you can assume that they will go in this order: firstly, your spouse; secondly, your children; thirdly, your parents. If you want to take the guess work away after your death and ensure that the maximum in liquid assets is handed on, then it is important to stipulate this in your policy.


Emma Worship.