Life insurance is an investment for your loved ones. Naming beneficiaries is an important step in setting up a life insurance policy. While you are required to name at least one beneficiary, it is also possible to name multiple beneficiaries. Doing so can help ensure that your death benefits go where you want them to go in case your primary beneficiary does not survive you.
Different Beneficiary Levels
There are many things to consider and many ways to distribute payouts under a life insurance policy. Among the important things to consider are the different beneficiary levels – primary, secondary, and tertiary.
Primary Beneficiary
This is the most straightforward option. It designates one primary beneficiary to receive 100% of the death benefit. Many people name their spouse as the primary beneficiary. However, contingency beneficiaries can also be named in case your primary beneficiary does not survive you.
Secondary Beneficiary
This would be the beneficiary next in line in case the primary beneficiary predeceases you. Naming a secondary beneficiary also considers the possibility that you and your primary beneficiary could die at the same time.
Tertiary Beneficiary
This is the back-up in case neither the primary nor the secondary beneficiary is able to receive the death benefits. Naming secondary and tertiary beneficiaries can help ensure that the proceeds of your life insurance policy will not revert back to your estate, where they may have to go through probate.
Review Designations Regularly
Life is full of change. Once you have designated your beneficiaries, it is important to review your designations on a regular basis, in case of divorce, birth, or death of a beneficiary. Our knowledgeable agent at North Carolina Health Plans in Raleigh, North Carolina will be happy to assist you in this process.
Different Ways of Distributing Proceeds
Another thing to consider is the way in which your death benefits will be distributed among your beneficiaries. While you always have the option of designating one person to receive 100% of your death benefits, you may want to distribute the proceeds among more than one or multiple loved ones. For example, a single father with five adult children may elect to distribute death benefits in five equal shares of 20%.
Per Stirpes vs. Per Capita Assignment
Per stirpes and per capita are distribution options to facilitate the claims process in case a beneficiary dies before the policyholder. With per stirpes assignment, the proceeds are divided according to rank in the family. This means that any children of a deceased beneficiary will equally split their parent’s share of the payoff. With per capita assignment, proceeds are divided equally among any beneficiaries and the children of the deceased beneficiary.
Life Insurance Assistance from an Experienced Agent
Life insurance is a significant investment. Setting up a policy requires important decisions about complex issues that can affect how the payout is distributed after your death. Our experienced agents at North Carolina Health Plans in Raleigh, North Carolina is here to help with every aspect of your life insurance policy, from finding the right policy, to naming beneficiaries, to determining how proceeds are distributed.