How to Change a Beneficiary on a Life Insurance Policy
Life insurance protects the people that you leave behind upon your passing. Because of this, you need to name a beneficiary or a person that will receive the money when you die. If you don’t name someone to receive your benefits, it becomes a part of your estate and a part of the probate system. In order to prevent that from happening, you must name someone. If the original person is no longer someone you want to receive your benefits, you can change the beneficiary with the following steps.
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Contact Your Insurance Company
In most cases, all you have to do is contact your insurance company and let them know that you want to change your beneficiary. The insurance company will then present you with a form that you must complete. In other words, the change cannot be verbal – you must make it official by putting it in writing. Make sure you are as detailed as possible on the form and spell everything correctly.
An Irrevocable Beneficiary
You should use caution when deciding to change your beneficiary. Some insurance policies have what is called an irrevocable beneficiary. As the name suggests, you cannot change this person at your own will. This doesn’t mean you are stuck with that person as the person inheriting your benefits, though. You will just need his or her permission before changing who inherits your life insurance benefits. If you are unsure of your type of policy and what you can or cannot do, contact your insurance company.
Adding a Beneficiary
A more important step you might want to take rather than just replacing a beneficiary is to add a second or even third person to your policy. Here’s how that works:
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Let’s say you named John as your main beneficiary. In fact, he is the only person you named on your policy. Now John happens to pass away before you do. If you don’t update your policy, your life insurance proceeds become a part of your estate and go to probate. There’s no saying who will receive your benefits and when they will receive them.
If you had named a second or third person on the policy, the benefits would go down the line. Let’s say Mary was second in line and John passed away. Mary would then receive your life insurance benefits as you designed. If Mary passed away before you, the final person in line would receive the benefits.
When Should you Change Beneficiaries?
So when should you change beneficiaries? Of course, anything can change in life, causing you to want to change, but the most common occurrences are:
- Birth of children
- New marriage
- Children aging out (if you have younger children at home that need the protection)
It’s important to review your life insurance policies periodically and decide if anything has changed. If you need to change your beneficiary, do so immediately. Don’t delay because as we all know, life is unpredictable. If you don’t change your policy and the beneficiaries are no longer alive, the money will not go where you intended, wasting your hard earned dollars that you paid on your premiums. Just stay in contact with your insurance agent and update your policy as necessary to stay on top of things.
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