11 common mistakes people make when choosing a life insurance beneficiary

No one likes to think about life insurance. But it’s wise to explain the life insurance policy you purchase to your beneficiaries.

Explain the policy details to the beneficiary now to avoid disagreements and conflicts within the family later. The beneficiary will know where to get the pension, the specific amount and distribution, etc., to avoid conflicts in the future.10. Only designate the primary beneficiary

Most people don’t consider that the beneficiary of their policy may die before they do. However, it can happen.

If the beneficiary has passed away when the policy is in effect, the life insurance proceeds will usually go into the estate and be subject to probate, which can result in a long wait for future heirs to receive the money.

Therefore, it is recommended that when purchasing an insurance policy, you can designate secondary and final beneficiaries. If the primary beneficiary dies before you, the money will pass to the secondary beneficiary. If the secondary beneficiary dies when you die, the death benefit will go to the final beneficiary.11. Designate the estate as the primary beneficiary

When an estate is named as the beneficiary of a life insurance policy, the policy proceeds will be distributed through the probate process. This can delay the payment of the policy proceeds and subject the estate to additional probate expenses. In some states, life insurance proceeds are protected from creditor claims if there is a named beneficiary, but not if the beneficiary is the estate.

Second, if the life insurance holder does not have a will, the process of disbursing the funds can take quite a while (the estate’s administrator must apply to and be appointed by the probate court before the estate can be settled). When an individual dies without a will, the state in which the individual resides determines how their assets are distributed.