• Skip to primary navigation
  • Skip to main content
Good Financial Cents®
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
  • Make Money
    • Get Money Now
      • Ultimate Guide to Making Money
      • Need Money Now
      • Get Free Money Fast
      • Make Money Fast
      • Make $1K Per Month
      • Make $100 Per Day
    • Control Your Destiny
      • Self Employed Jobs
      • Make Money from Home
      • Hobbies That Make Money
      • How to Become a Freelance Writer
      • Small Business Ideas to Start
      • How to Become an Independent Contractor
      • Best Online Jobs
    • Passive Income
      • Passive Income Ideas
      • Multiple Streams of Income
      • Extra Income
      • Residual Income Ideas
      • Learn to Sell e-Books
      • Make Money on Facebook
      • Make Money on Tiktok
      • Best Online Survey Sites to Make Money
    • Explore More
      • Best Side Hustle Ideas
      • Make Money for Teens
      • Best Online Colleges
      • Best Jobs No College Degree
      • Become a Millionaire
      • Careers for the Future
  • Manage Money
    • Best Of
      • Budgeting Tools
      • Personal Finance Software
      • Best Cashback Cards
    • Company Reviews
      • Personal Capital vs Mint
      • Personal Capital Review
      • SmartAsset Review
    • Guides
      • Buy or Lease a Car
      • What is Liquid Net Worth?
      • Setting Financial Goals
      • How to Budget
      • Ways to Save Money
    • Explore More
      • How Much Car Can I Afford?
      • Best Auto Refinance Companies
  • Invest
    • Best Of
      • Best Short and Long-Term Investments
      • Best Low Risk Investments
      • Best Online Stock Brokers
      • Best Crypto Exchanges
      • Best Short Term Investments
      • Best Long Term Investments
      • Best Trading Platforms
      • Best Investment Apps
    • Company Reviews
      • Lending Club
      • Robinhood
      • M1 Finance
      • Ally
      • TD Ameritrade
      • Fundrise
      • Betterment
      • Etrade
      • Wealthfront
    • Guides
      • Investing for Beginners
      • Investing Small Amounts of Money
      • Investing in Real Estate
      • No Money Down Real Estate
      • Bonds vs Stocks
      • Peer to Peer Lending
      • Best Hedges Against Inflation
      • Safe Bitcoin Investing in 2023
    • Explore More
      • Bitcoin vs. Real Estate
      • Betterment vs Wealthfront
      • Investing for College Students
      • Stock Market Alternatives
    • By Investment Amount
      • How to Invest $100
      • How to Invest $1K
      • How to Invest $2k-$3k
      • How to Invest $5K
      • How to Invest $10K
      • How to Invest $15k
      • How to Invest $20K
      • How to Invest $30k
      • How to Invest $50K
      • How to Invest $100K
      • How to Invest $200K
      • How to Invest $500K
      • How to Invest $1M
  • Taxes
    • Best Of
      • Best Tax Relief Companies
      • Best Tax Software
    • Guides
      • Federal Income Tax Guide 2023
      • Taxes and Cryptocurrency
      • How to Do Your Own Taxes
      • How to Invest Your Tax Refund
      • Hiring a Professional Tax Preparer
      • Tax Tips for Freelancers
    • Company Reviews
      • TurboTax Review
      • H&R Block Review
      • Taxslayer
      • Tax Act
  • Insurance
    • Best Of
      • Best Life Insurance
      • Best Home Insurance
      • Best Auto Insurance
      • Cheap Term Life Insurance
      • Car Insurance For Young Adults
    • Guides
      • Term vs Whole Life
      • Different Types of Car Insurance
      • Average Cost of Car Insurance
    • Explore More
      • Life Insurance Over 50
      • Life Insurance Over 80
      • $1 Million Life Insurance
      • $2 Million Life Insurance
      • $3 Million Life Insurance
    • Company Reviews
      • Banner Life Insurance
      • Ladder Life Insurance
      • Health IQ
      • Haven Life
      • Policygenius
      • State Farm Auto Insurance Review
  • Retirement
    • Roth IRA
      • Best Places to Open a Roth IRA
      • Best Investments for Roth IRA
      • 7 Roth IRA Secrets
      • Roth IRA Conversion Guide
      • Roth IRA Rules
      • Roth IRA vs Roth 401k
      • Are Roth IRA Contributions Tax Deductible?
    • 401(k)
      • 401(k) Limits
      • 401(k) to Roth Rollover
      • Is 401(k) Enough for Retirement?
      • Maxed Out 401(k): What's next?
    • Traditional IRA
      • Traditional IRA Rules and Limits
      • Traditional IRA vs. 401(k)
      • Simple IRA Rules
      • SEP IRA Rules
      • How Much Do You Need to Start an IRA?
    • Explore More
      • SEP IRA vs. Roth IRA
      • 457 Plan for Successful Retirement
      • 401a Rollover Rules
      • How to Retire at 50
      • How to Retire at 55
  • Banking
    • Best Of
      • Best National Banks
      • Best High-Yield Savings Accounts
      • Best Checking Accounts
      • Best Savings Accounts
      • Best CD Rates
      • Best Money Market Accounts
    • Company Reviews
      • BBVA
      • Synchrony
      • Wells Fargo
    • Explore More
      • 9 Banking Alternatives for 2023
      • What is a Credit Union?
  • Home
    • Best Of
      • Best Mortgage Lenders
      • Best Mortgage Refinance Companies
      • Best Home Warranties
      • Best Homeowners Insurance
      • Best VA Loans
      • Best Mortgage Rates
      • Best Moving Companies
      • Best Home Security
    • Guides
      • Home Buying Checklist
      • Online Home Appraisal
      • How Much House Can I Afford?
      • First-time Homebuyer Programs
      • How to Get Approved for a Home Loan
      • Save Money When Building a House
      • How to Save for a Downpayment
      • When to Refinance Your Mortgage
    • Explore More
      • 15 vs. 30-year Mortgage
      • Home Warranty vs. Home Insurance
      • Veterans United Home Loan Review
      • Quicken Loans Review
      • HELOC vs Second Mortgage
      • DCU Mortgage Review
      • Costco Mortgage Program Review
      • USAA Mortgage Loan Review
  • Credit
    • Best Of
      • Best Credit Repair Companies
      • Best ID Theft Protection Services
      • Best Credit Report Options
      • Best Bad Credit Loans
    • Guides
      • How to Build Your Credit Score
      • How to Raise Your Credit Score in 5 Months
      • How to Dispute Your Credit Report
      • Hot to Remove Collections from Your Credit Reports
      • How Identity Theft Destroys Your Credit Score
    • Explore More
      • What is a Good Credit Score?
      • What is a Bad Credit Score?
  • Debt
    • Best Of
      • Best Debt Consolidation Loans
      • Best Personal Loans
      • Best Student Loans
      • Best Student Loan Refinance
    • Guides
      • What is Debt Consolidation?
      • How to Get Out of Debt
      • How to Get a Personal Loan Approved
      • How to Pay Off Student Loans Faster
      • Should I Consolidate My Debts?
      • Should I File for Bankruptcy?
    • Company Reviews
      • Credible
      • Sofi

Choosing Your Life Insurance Beneficiary Carefully

https://www.goodfinancialcents.com/wp-content/uploads/2019/07/MG_5503-150x150.jpg
  • Written By:
    Jeff Rose, CFP®

    Jeff Rose, CFP®

    Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance...

    Read More
  • Updated: September 1, 2021
  • 7 Min Read
  • Advertising Disclosure

    Advertising Disclosure

    GoodFinancialCents® has an advertising relationship with the companies included on this page. All of our content is based on objective analysis, and the opinions are our own. For more information, please check out our full disclaimer and complete list of partners.

Quality Verified THE GFC® PROMISE
shield check icon
Quality Verified

GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.

These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.

Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.

Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.

shield check icon
Why You Can Trust GoodFinancialCents®

GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.

These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.

Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.

Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.

Unfortunately, there are thousands of families every year struggling to get their resources because of beneficiary mistakes.

Although it is something not extremely fun or exciting to plan for, it is necessary to give thought to who your beneficiary will be in the event of your death.

Even if you have put extensive thought and planning into your life insurance plan, it may be the case that you did not put as much thought into who would gain the proceeds of your life insurance policy.

The fact of the matter is that both the selection process as well as the maintenance of your policy are equally important when it comes to when you should get life insurance.

Choosing Your Beneficiary

When writing out who will receive life insurance benefits upon your death, simply putting one-word designations like “spouse,” “children,” or “grandchildren” isn’t enough anymore.

When choosing a life insurance beneficiary, it is very important to be clear in the designations of who is going to receive the benefits after the death of the insured. 

Due to specifications regarding the wording of beneficiaries, certain members of the family may be left out, while others may be unintentionally included. For example, if you put “spouse,” then former spouses may be included in the event of a divorce.

In the case that children are the beneficiaries, then which children will be included must be specified. Are they only children from your marriage, or do children born out of wedlock count?

It becomes especially complicated when there is an ex-spouse involved, or adopted children. A specification is required if adopted children are included, or the children of a spouse which you may have adopted as well.

The same applies for any grandchildren. Also, if the children are minors, it is generally recommended that a guardian be appointed, as benefits aren’t usually paid to minors.

Depending on what state you live in there are a number of rules that you must adhere to when it comes to choosing a beneficiary.

It is also typically the case that if you are leaving your policy to a minor, they must have a guardian assigned to them at least until they are considered an adult.

Types of Beneficiaries 

A beneficiary does not necessarily have to be an individual, though. It can also be your estate, or even an organization.

The most important part about choosing a beneficiary is being extremely specific about who you are designating. A lot of people will specify by providing a social security number or some other type of unique identifier in addition to a name.

The beneficiaries can be specific, or a class. Specific beneficiaries are identified by name and relationship to the insured, while a class is identified mainly by relationship, such as “children.”

If a class is chosen as a beneficiary, who belongs to that class needs to be clearly identified, as legal complications can arise if the class isn’t distinguished.

In the event that you want to name multiple beneficiaries, the same rules apply as if you were to only have one beneficiary.

You need to be specific in the name of the person, as well as have a unique identifier. Additionally, the percentage and description of who receives what portion of the payout is equally necessary.

Ads by Money. We may be compensated if you click this ad.AdAds by Money disclaimer
With a Life Insurance policy you can take care of your family the right way.
Should anything happen to you, you'll want to leave your loved ones a financial nest egg for their wellbeing. Click on your state to find out more.
HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas
See An Estimate

Policies usually do not have a limit to the number of beneficiaries that you can claim.

Many people think that is only necessary to allocate based on round numbers as opposed to percentages, but this can lead to many problems if your policy grows in value during its life.

Changing Your Beneficiary

It is important to remember that if you do not keep your beneficiaries up to date, they will not be in the name of the person that you want the proceeds to go to. There are multiple life events that can change the status or identity of your beneficiaries.

It is extremely easy to change your beneficiaries; the hard part is remembering to do so. This is one of the most common mistakes that policyholders make in regards to their life insurance.

They name their beneficiary and then never think about it again, which can cause a whole avalanche of problems if they pass away.

There are, however, two types of beneficiaries: one of which is flexible in nature, whereas the other is not. The first type is called a revocable beneficiary. This means that the beneficiary of the policy can be changed whenever the policyholder chooses.

An irrevocable beneficiary, on the other hand, requires the sign off of the beneficiary in order to change who receives the proceeds of the policy.

This can prove difficult if the beneficiary is not acting in your best interest, or if they are not on the same page as the policyholder. As you can see, there are distinct differences between the two types of beneficiaries.

You should be very careful in choosing which type your policy has, since it could make a significant difference in the future. In just about every case, it makes more sense to go with a revocable beneficiary that allows you to change the beneficiary at any time.

This will give you more freedom in case there are any problems with the beneficiary, or if you need to change who will receive the money.

Contingent Beneficiaries

It is advisable to have several levels of contingencies. In the event that your beneficiary dies or is in some other way incapable of receiving your proceeds, there is a contingent beneficiary that is also named.

If the contingency dies as well as the beneficiary, the benefits may be left in limbo, or to be disputed by other family members.

That is why several contingencies must be clearly identified, as many complications can arise considering the possibilities of a changing family structure.

This can apply in most cases to spouses where the policyholder and the beneficiary are similar in age and could potentially die from natural causes around the same time.

In the case that you do not have a contingent beneficiary named, the proceeds will become a part of your estate. This should be avoided at all costs, as it is usually the case that the estate will be taxed heavily.

It’s always best to have a detailed plan in place regarding who would get the money if something were to happen to the beneficiary. You don’t want your life insurance policy to go to waste or be much less effective than you planned.

How Much Life Insurance Will Your Beneficiaries Need?

As important as it is to find your right beneficiary, you have to make sure that person(s) is left with enough money to cover any financial obligations you will leave behind. So, let’s take a look at some of the factors that help you decide how much coverage you need to buy.

You always need to calculate your current debt situation first.

The main goal of your life insurance plan is to give your family the money needed to pay off all your bills and debts. The number you come up with should be the baseline for how much coverage you start looking for.

If it’s in your budget, we also suggest adding a few years worth of salary to the final total as well. Your income has helped support the family for years, and a sudden loss could bring on major lifestyle changes.

To stave that quick change, it’s best to up the value some to provide breathing room as family members cope with a drop in household income.

Another category to account for is the funeral expenses. While you may not realize it, funerals are expensive.

Funerals can come in around $10,000, and are a big expense that some might not be ready to pay. Your coverage will give your family the money they need to fulfill your family wishes.

Obtaining Affordable Life Insurance

In addition to choosing the right beneficiary, and ensuring that they will have enough money, it’s also important to get the most affordable life insurance plan available.

A lot of applicants are surprised to see how cheap a life insurance plan can be, regardless of how much life insurance you need. The following tips can help applicants obtain the most affordable life insurance plan for themselves and their loved ones: 

  • Cutting Tobacco: One of the easiest ways to get lower insurance rates is by cutting out tobacco. Users posing a much greater risk for health problems, such as cancer or heart problems, could equal a greater risk to the insurance company. By mitigating that risk they’ll be charging you much more for your insurance coverage, and that charge could be twice the quoted amount.
  • Getting in Shape: The medical exam you’ll complete is going to show the carrier a snapshot of your overall health. If you’re overweight, then your premiums are going to be around 50% higher than a person who rates healthy. When you know the date you want to apply for life insurance, it’s best to start living a healthier life a few months beforehand. Eat a little cleaner, and exercise a little more. These actions will keep your premiums down.
  • Laying Off the Gas Pedal: When the insurance company reviews your application, they are going to pull your driving records. With a lengthy accident or a ticket history, the carrier could see you as a high-risk applicant, which would translate into more expensive coverage. Slowing down on your way to work in the morning can save you hundreds of dollars every year, not to mention you won’t have to pay those expensive speeding tickets.
  • Taking Time to Compare: Our last tip is the easiest step for you: compare, compare, compare. You can make it even easier by working with us!

We have years of experience working with quality insurance companies and we’ve helped all types of applicants get the perfect plan. Our status as independent agents allows us to gather as many quotes as fast as possible and present them to you in a simple form.

Other Considerations

In most cases, there is a person or some other factor that is the catalyst for taking out a life insurance policy at all.

It is for this reason that choosing a beneficiary when it comes to buying affordable life insurance is typically a pretty painless task. There are some snags that one can face when choosing a beneficiary, though.

Your estate as the beneficiary may seem like a good idea, but it never is. Not only is your estate liable to be seized by creditors, but your estate is also heavily taxed.

If you are concerned that your estate may not be covered in regards to expenses. there are other ways to protect it other than leaving your estate as the beneficiary.

If you want to avoid this you can still name a person as a beneficiary, but also put it in writing that you want the proceeds to first be used for settling your estate. 

This is one of the best ways to ensure your estate is covered after your passing without having the life insurance policy eaten alive by taxes.

A lot of policyholders don’t put a lot of thought into who they name, or they never go back and fix the beneficiary named. Also, don’t use vague wording that may include or leave out people you don’t wish to. This can lead to a lot of complicated problems in the future.

The Bottom Line 

When deciding on life insurance beneficiaries, it is best to consider all possible situations.

While it may become complex and it is grim to think of the future deaths of you or family members, all of these things do happen.

Save your possible beneficiaries the trouble of having to dispute the distribution of benefits by defining beneficiaries as specifically as possible.

Aside from naming a beneficiary correctly, it’s vital that you also have enough life insurance coverage for your family.

Having too little insurance could leave them with thousands of dollars in leftover debt. Try speaking with a life insurance advisor to determine how to properly designate your beneficiaries.

Facebook LinkedIn Twitter

About the Author

Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion - educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.


Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University - Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® - Accredited Asset Management Specialist - and CRPC® - Chartered Retirement Planning Counselor.

While a practicing financial advisor, Jeff was named to Investopedia's distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC's Digital Advisory Council.

Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.

Facebook Twitter LinkedIn


You Might Also Enjoy

Best Homeowners Insurance Companies of 2023 - Updated for March

Best Homeowners Insurance Companies of 2023 - Updated for March

Life Insurance with Kidney Problems

Life Insurance with Kidney Problems

Best Extended Car Warranty for 2023

Best Extended Car Warranty for 2023

Ladder Life Insurance Review - Term Life Insurance with a Twist

Ladder Life Insurance Review - Term Life Insurance with a Twist

Sproutt Life Insurance Review: Is it Legit?

Sproutt Life Insurance Review: Is it Legit?

Best Car Insurance for Young Drivers in 2023

Best Car Insurance for Young Drivers in 2023

One Response

  1. Ruben Rivera January 15, 2021

    I need a Change 0f beneficiary form. Can I get it by email. Thank you.

    Reply

Leave a Reply

Cancel reply

  • Make Money
  • Manage Money
  • Invest
  • Taxes
  • Insurance
  • Retirement
  • Banking
  • Home
  • Credit
  • Debt
  • About
  • Contact
  • Facebook LinkedIn Twitter

© 2023 Good Financial Cents®. All Rights Reserved. | Privacy Policy | Disclaimer

All written content on this site is for information purposes only. Opinions expressed herein are solely those of AWM, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

All third party trademarks, including logos and icons, referenced in this website, are the property of their respective owners. Unless otherwise indicated, the use of third party trademarks herein does not imply or indicate any relationship, sponsorship, or endorsement between Good Financial Cents® and the owners of those trademarks. Any reference in this website to third party trademarks is to identify the corresponding third party goods and/or services.