How do I choose a beneficiary?
Designating a beneficiary is an important right of life insurance ownership. It lets you determine who receives your policy benefits. Under current tax law, life insurance benefits paid to a beneficiary are generally not taxable income.
Common terminology
- Primary beneficiary - The person or persons named will be the first to receive the proceeds.
- Alternate beneficiary — Policy benefits will be paid to the contingent (secondary) beneficiary, if the primary beneficiary is not living.
- Irrevocable beneficiary - Once you designate an irrevocable beneficiary, you may not change it without the beneficiary's written permission.
- Default beneficiary - If you don't name a beneficiary, policy benefits will be paid in order of priority as listed in the policy.
How to designate multiple beneficiaries
After determining whom you want to select as your beneficiary or beneficiaries, you may then choose what percentage of the benefit each individual should receive.
For example:
Primary Jane Doe, daughter, and John Doe, son
- Jane and John will equally share the proceeds. If any additional children are born, they will not be eligible to receive a portion of the proceeds.
Primary Susan Doe, spouse
Alternate Jane Doe, daughter, 75 percent and John Doe, son, 25 percent
- The proceeds will be paid to Susan Doe. If Susan is not living, then the proceeds will be paid 75 percent to Jane Doe and 25 percent to John Doe.
Primary William Doe, Trustee, his successors or successor in trust under the William Doe Revocable Trust Agreement. Executed by the insured on June 1, 1995.
- The proceeds will be paid to a formal trust. If the Trust is an institution, the address of the institution should be included.
