What Is a Beneficiary in Life Insurance and How to Choose?

One of the major motives of an individual behind purchasing a life insurance plan is to ensure a financial hedge for the family in case they pass away prematurely. Under such unfortunate circumstances, their family gets a lump sum death benefit.

Nevertheless, the insurance provider gives the death benefit only to the beneficiary. Before purchasing a policy, individuals must be aware of what a beneficiary is to ensure that the person receives their death benefit, thereby ensuring that their family stays financially protected after their unfortunate demise.

1. Primary Beneficiary

2. Secondary Beneficiary

A secondary beneficiary or contingent beneficiary is a person entitled to receive the death benefit if the primary beneficiary is dead. Nevertheless, according to the rule for the life insurance beneficiary, a secondary beneficiary will receive the lump sum amount only if its primary beneficiary passes away before the policyholder.

Now that you have learnt what a beneficiary is and what their role is and what the types are, you should also be aware of whom you can make the nominee for death benefits.

Family Members

The Estate Executor

Legal Parents of a Minor Beneficiary

Trusts

Charitable Trusts

Here is all you need to know about how to add a beneficiary: 

Step 1: Selecting the Right Beneficiary

You need to ideally choose the name of a person who is dependent on you financially. While selecting your beneficiary, you should think of the person who will take care of your family's financial responsibilities in case of your unfortunate demise. Nevertheless, as stated, you should also designate both primary and contingent beneficiaries on your policy.

Step 2: Enlisting the Beneficiary

Specify their names and other details on the application form. Your insurance company will accept them as your legal beneficiaries.

Step 3: Details to be Filled

Following are some of the details of your chosen beneficiaries that you will have to mention in the application form of your policy:

• Names
• Address
• Phone number
• Identity proof

Now, after understanding what a beneficiary is, you can realise how important it is to choose the right person. Nevertheless, as stated, you should ensure that you have included both the primary and secondary beneficiaries in your life insurance policy. This way, even if your primary beneficiary dies, the other one can claim the death benefit.