What a beneficiary is
When you buy life insurance, you choose who receives the money. That choice is recorded on the policy itself, and the insurer pays whoever is named there. In most cases the beneficiary named on the policy takes priority over what a will says, which is why keeping it up to date matters.
Primary and contingent beneficiaries
Primary
First in line to receive the benefit. You can name one person or several, with a percentage for each.
Contingent
Receives the benefit if no primary beneficiary is living when you die. A backup that avoids delays.
Who you can name
- A spouse or partner. The most common choice.
- Adult children or other relatives.
- A trust. Useful when you want to control how and when money is paid out.
- A charity or other organization.
- Your estate. Possible, but it can slow down payment and expose the money to the estate's debts.
Naming children
Insurers generally cannot pay a death benefit directly to a minor. If you want the money to go to young children, common approaches are setting up a trust or naming a custodian under your state's rules for gifts to minors. An attorney can help you choose the right approach for your family.
Tips for getting it right
- Use full legal names, dates of birth and relationships. Avoid descriptions like "my children."
- Make sure percentages add up to 100%.
- Tell your beneficiaries the policy exists and which insurer issued it.
- Check the designation every few years and after any major life change.
Good to know
Rules about beneficiaries, including a spouse's rights, vary by state. Quotient does not provide legal or tax advice.
Frequently asked questions
Can I change my beneficiary later?
Yes, in most cases, by sending the insurer a change form. The exception is an irrevocable beneficiary, who must agree to any change.
What if I don't name anyone?
The benefit is usually paid to your estate, which can delay payment and may reduce what your family receives.
Do beneficiaries pay income tax on the benefit?
Life insurance death benefits are generally not subject to federal income tax for beneficiaries. Ask a tax professional about your situation.
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