Providing for your loved ones’ security and comfort is why you buy a life insurance policy. But did you know things could be seriously compromised if you don’t name the right beneficiaries?
Your beneficiary is the person or entity you name in your life policy to receive funds in the event of your passing. Your beneficiary can be a person, business, trust, charity or even your church. And, you can have more than one.
Erie Family Life forms require that you name a beneficiary. And that’s a good thing considering the fact that it spares your loved ones from having to go through a probate court to receive any funds from the policy. Probate court is a major disadvantage since it:
- Is a complicated legal process.
- Delays the distribution of funds.
- Will likely require your loved ones to pay legal fees.
- May subject the life insurance benefit to estate taxes.
By having you name a beneficiary on your policy, ERIE ensures that your policy is able to fulfill its purpose of protecting your loved ones when you’re gone.
Things to keep in mind
As you consider naming your beneficiary, try to imagine a world without you. Will your children need money for college? Will your parents need a financial boost? Are there any grandchildren or other loved ones you’d want to help out? Is there a charity you want to support? Think it over and don’t feel you have to narrow it down to one—Erie Family Life allows you to name as few or as many beneficiaries as you wish.
Once you choose your beneficiaries, it pays to:
- Get specific. According to the Insurance Information Institute, the most important thing is to clearly identify your beneficiaries. Erie Family Life forms require that you list the beneficiary’s name, relationship, address and percentage of the proceeds he or she is to receive. This enables ERIE to easily identify and reach the beneficiary at the time of a loss. It also expedites the claim process for your family since there is a specific beneficiary instead of something generic like “son” or “wife.” By getting specific, it’s easier to identify who should benefit from your policy, and it lessens the likelihood of prolonged and costly disputes.
- Account for contingencies. A contingent beneficiary is the recipient of your policy’s benefits in the event your primary beneficiary predeceases you. The primary beneficiary you name will typically receive all the proceeds of your life insurance policy. If the primary beneficiary dies before you, that money will go to your contingent beneficiary or beneficiaries. You never know what can happen, so definitely take the time to name one or more contingent beneficiaries.
The importance of reviewing your policy
ERIE Agent Julie Statland of Statland & Katz in Silver Spring, Md., recommends reviewing your policy and its beneficiaries at least once every year and after any major life changes. Doing so will help you avoid a situation faced by one of the families her agency insured.
When an ill child in that family passed away, the agency discovered the child’s aunt had been named as beneficiary on the policy. “It would have been better to update the policy to name the mother as the primary beneficiary with the aunt as a contingent beneficiary,” says Statland. “When you’re grieving the loss of a child, the last thing you need is a delay in getting funds to pay for the funeral, so be sure to always notify your Agent of any life changes.”
Eriesense recently shared the top eight reasons to review your life insurance policy. Some extra events you’ll want to consider include the birth of any grandchildren and any events that prompt someone to change his or her last name.
Remember that challenging a named beneficiary after a person’s death isn’t just an unpleasant legal matter that can be difficult and costly. It’s also an emotionally fraught experience for your loved ones that, for just a fraction of the time and effort now, you can help them avoid.
No life insurance? Then read this.
Do you lack life insurance because you’re not sure if you need it? Or are you afraid you can’t afford it?
If so, you might want to check out the ERIE Life Insurance Calculator. It asks you a few questions about your financial situation before giving you a fast, accurate look at the kind of life insurance you might need from ERIE Family Life.* You might be surprised that it’s a lot less than you thought!
If you and your loved ones would benefit from having a policy in place, consider speaking with your ERIE Insurance Agent about a term life policy. This popular, affordable coverage lets you buy protection for a specific number of years. Term life is ideal if you want a high level of protection at a great rate for a set number of years.
Later on, you can choose to convert your term policy to a permanent life policy. Permanent life, also known as whole life, accrues cash value and can remain in place for your entire life. The premium amount remains the same every month regardless of any health changes, and the cash value on your policy is guaranteed.
* Life insurance products not available in N.Y. Not all companies are licensed or operate in all states. Not all products are offered in all states.