Life insurance is one of the best ways of ensuring that you provide for your loved ones and heirs beyond the grave. Naming the beneficiary to receive compensation after you pass away is a big decision that is often overlooked and not taken seriously. By choosing the right beneficiaries you will avoid contesting life insurance beneficiary claims in future. Despite naming beneficiaries being a seemingly easy and simple task, several mistakes result in unintended and far reaching consequences. Mistakes to avoid Failing to name a beneficiary The most obvious and common mistake made by most people is not naming any beneficiary when taking a life insurance policy. This omission often leads to unnecessary problems including but not limited to avoidable tax consequences, and loss of property/investment. If at the time of your death you have not named any beneficiary to your life insurance policy, the insurance company may decide to pay the compensation settlement to your estate, which may most likely give rise to other potential consequences and problems. Naming minors as beneficiaries Insurance companies do not pay life insurance proceeds directly to minors. In a situation where you have named a minor as the beneficiary, a guardian is appointed by the court to receive compensation on behalf of the minor. This is usually a lengthy and expensive process and can also be quite risky if the appointed guardian cannot be trusted with handling the compensation proceeds until the minor attains legal adult age. Ineligibility for beneficiaries with special needs If you name a person with special needs or any form of disability as the beneficiary, once they receive the benefits from the proceeds they may disqualify from receiving any government support. This may expose the beneficiary to future financial hardships especially if the amount of money they receive as benefits is not enough to last them throughout the remaining part of their lives. If you want a person with special needs to be the beneficiary of your life insurance policy, the best thing to do is create a trust fund for them rather than have them receive the benefits directly. Failure to update beneficiary details If you experience a major life development such as a divorce or death of your spouse, it is necessary to update beneficiary details in your life insurance policy. Failure to update these designations may lead to the wrong person receiving your life insurance policy benefits. For example, if you do not update your beneficiary’s designations after divorce, the benefits may be paid to your ex-spouse which may not be what you wanted or desired to happen. Naming only one beneficiary Naming a single beneficiary may also be a very risky move especially if the beneficiary dies before you do and you fail to update the beneficiary details. In such a scenario, the judge decides how benefits from your policy are to be distributed, which may be contrary to your desires. To reduce this risk, it is advisable to name at least two beneficiaries or have a contingent beneficiary who will receive the benefits in case the first beneficiary dies. When filling out a life insurance policy, it is advisable to seek advice from insurance experts and estate lawyers on the right and the best way to fill out the form. This goes a long way in ensuring that the right beneficiaries receive the benefits in the event of your death.
The whole of life insurance is an insurance policy that remains in force as long as the policyholder is alive and matures when he or she dies. It provides financial security to the family of the policyholder in case of death of the insured. If you want to take out a whole of life insurance policy, consider the following factors. Do An Honest Evaluation Of Your Current Financial Position One of the major principles of insurance requires that you tell nothing but the truth when getting into a life insurance contract. For example, you should give your correct age, your exact monthly income, another whole of life insurance policies taken, loans taken with the various financial institution, and virtually every bit of information that explains your financial position. When you die, and your insurance policy matures, your insurance company should pay your funeral expenses, clear your debts or give the proceeds from your policy to your family in the form of a lump sum payment depending on the specifications of the contract. By so doing, your loved ones will find it easy to cope with your absence, at least as far as finances are concerned. However, if you did not give all the information required by your insurer correctly at the point of taking out the policy, your family may get nothing out of your policy. To add an insult to the injury, you will not be there to explain everything to anyone. It is thus better to be safe than sorry. Understand The Various Life Insurance Products Available There are several life insurance products in the life insurance market today. It is critical that you understand all of them before deciding which one is the best for you. For example, if you are married, there are joint life insurance policies whereby compensation is provided to the party that remains in case of death of either of the parties. You can take out one of such policies with your partner. You can also get a life insurance on your own depending on your needs. Get Advice From Professional Life Insurance Brokers Understanding a particular life insurance product in black and white is key to financial stability in the future. It is therefore advisable to get in touch with a professional whole of life insurance broker to help you identify all the contingencies so that you can make a right decision. These brokers also know how you can save money on your whole of life insurance policy and their advice will be of great help to you. Choose The Most Trusted Providers Once you have identified the best product for your needs, it is now time to choose the best life insurance company for that particular policy. One of the primary factors you should consider when choosing the life insurance company of choice is the history of claim payments by that particular company. Go for a life insurance company that pays claims promptly so that you have peace of mind knowing that your loved ones will be given what they rightly deserve once you die. If you get your whole of life insurance policy right and choose the best life insurance company in terms of claims payment, you can die peacefully when your time comes.