Common Life Insurance Beneficiary Naming Mistakes

Common Beneficiary Naming Mistakes

Common Beneficiary Naming Mistakes

Naming a beneficiary for your life insurance policy and your last will and testament is one of the most important decisions in your life. For many people it is straightforward, for others with complex family situations in can be very difficult. Even for those with a close knit family, naming the wrong beneficiary can lead to hurt feelings and family squabbles after you pass away.

The last thing you want to do is create a mess for your family to clean up after you depart, which can potentially ruin their relationship with each other. So let’s take a look at the most common mistakes people make when naming their beneficiary.

Pushing people into a tax trap

Life insurance is tax free except when different people are playing the role of policy owner, the insured and the beneficiary. So for example if your uncle takes out a life insurance policy on your grandfather and you are named as the beneficiary, then the money could be declared a taxable gift. You could land the person with a substantial tax bill and run into financial problems at a later date if that is not fully understood.

The best way to avoid this is to make sure that the insured party also owns the policy and you will avoid paying any tax on the sum.

Believing your will determines who gets the life insurance money

The life insurance policy operates separately to any will you might have drawn. So that means any declaration in your will saying that the life insurance money should be split a certain way is irrelevant. The life insurance policy only uses the beneficiary list to determine who will get the money. So if that is out of date, the money may go to someone unexpected, regardless of your wishes in your will.

Not keeping the beneficiary up to date

Many people don’t keep their beneficiary list up to date. You might get divorced and have your first wife listed as a beneficiary, or your beneficiary might die, or you might have a falling out with your beneficiary. If you do not update the policy, your relatives might get a nasty shock when they realize they won’t see any of the money.

Skimping on details

If you wish to have a somewhat complex arrangement with your life insurance beneficiary list, make sure it is detailed very closely.

Say for example if you want 5 grandchildren and 3 children to take an equal share in the policy, how do you stipulate that without any doubt?

The two methods are per stirpes and per capita. Per stirpes means that the proceeds are divided by branch of the family and per capita means that it is done on a per head basis.

So in the example above of 5 grandchildren and 3 adult children, one of your adult children may be responsible for 3 grandchildren and the other 2 adults may be responsible for 1 grandchild each.

Now if you did it on a Per stirpes basis, the three children would receive an equal amount each because it is following the branch of the family. So the adult with 3 children gets the same as the adult with 1 child. You may see that as fair.

If you did it on a per capita basis, the adult with 3 children is getting 4 shares, while the adults with 1 child get 2 shares of the policy dividend. Is that more equitable or less equitable? You have to also consider other circumstances of the children involved, are they all well off, or are some struggling more.

Also, what happens should one of the children or grandchildren pass away? Sometimes complex and precise documents should be lodged when dealing with beneficiaries and an estate lawyer might be required.

Forgetting to tell people you have a life insurance policy!

It happens quite a bit – the family doesn’t realise the relative doesn’t have a life insurance policy, where it is and who the beneficiary is. Sometimes a benefit is never claimed and hundreds of thousands of dollars are lost to the family because the deceased never told them about the policy. Make sure your family knows about the policy and the beneficiary.

Giving money to young people without stipulations

When you name a young person as a beneficiary, often they aren’t equipped with the skills and life experience required to spend wisely. If an 18 year old suddenly inherits $1 million dollars, their first thought may not be about investing it intelligently, it might be about getting a sportscar.

You could even send them on a destructive path of partying and binging on drugs and alcohol or set them up to be fleeced by someone unscrupulous. Some people set up trusts so that the young person can obtain some spending money to make their life more comfortable, to help them with a home deposit but they don’t receive unfettered access until they are older. Sometimes trusts have requirements, so if the young person finishes college they get a set amount early as a reward.

Naming only 1 beneficiary

You may think that a certain member of your family is smart enough to handle all of the funds from the life insurance policy and hand out money to the other relatives. But after you are gone, their attitude may change, they might have a falling out with another relative or other relatives may resent them being named as sole beneficiary.

It is often a mistake to place a great deal of trust in the hands of a sole beneficiary, and it’s better to make your intentions for the money known by having multiple beneficiaries.

Additionally if you have a single beneficiary, if something happens to them, then the policy may be in chaos. If you pass away in a car accident and your sole beneficiary is in the car with you and passes away, you could be leaving your family in chaos. If you do not make up more complex arrangements for beneficiaries, at the very least you should have a secondary and final beneficiary listed.

Naming a minor as a beneficiary

Some people have a favorite grandchild who they want to see succeed in life, so think it may be a great idea to name them as a beneficiary. The problem here is that life insurance companies will not pay a minor when you pass away. A guardian will need to be appointed and that may be someone you don’t trust with the money, or someone you don’t like. Instead, you should find an adult who you know is trustworthy and is able to safeguard the money until the minor reaches adulthood and can claim it (at 18 or 21 depending on the location).

Making a beneficiary lose their welfare entitlements

If you have a beneficiary who is receiving government entitlements like some with a disability, they may lose that when they receive the money from the life insurance policy. The amount they can receive is shockingly low, with anyone who receives more than $2000 inheritance disqualified for medicaid and supplemental security income. In this situation you need to setup a trust which will manage the money in a way that helps the person in the long term and doesn’t dramatically affect their welfare entitlements if possible.

Examining Funeral Insurance

Funeral Insurance

Funeral Insurance

It’s often difficult to think about your own mortality and the people you are leaving behind. However if you think about those you are leaving behind for a moment, it’s much easier to get motivated and prepare for your own passing. Will your family be able to afford the various funeral expense, will they struggle to pay the expenses your passing will incur or are they financially secure? When you do pass away your family will be under enough stress mourning their loss, so adding a financial burden is a concern that many people wish to avoid.

Many older people have decided that they don’t want to place any additional financial stress on their family so have opted for a funeral insurance product. Funeral insurance is a payment that occurs on your passing to pay for funeral related expenses such as the cost if a casket or internment, and any related ceremonies.

This article will examine the risks and benefits of obtaining a funeral insurance policy, highlighting what you should be looking for in a policy to obtain value for money and examining if funeral insurance is good value for money at all.

Funeral Insurance is actually a very old form of insurance that can be traced back to ancient Greece when guilds called “benevolent societies” cared for surviving relatives and paid a death benefit to the family. The tradition went on in the middle ages and Victorian times with “friendly societies” taking up the cause.

In modern times, funeral insurance has been a part of many life insurance policies, adding sufficient compensation to cover the cost of the funeral in the life insurance payout. In recent years, companies have started heavily promoting funeral insurance as a separate policy at a substantially reduced price compared to life insurance, and with different eligibility requirements so older people could obtain it. Funeral insurance also pays out much quicker than many life insurance policies, which need sometimes need to establish cause of death before paying.

Before you buy into a funeral insurance policy you have to consider the value for money you receive. Under some funeral insurance plans you can end up paying more in premiums than the value of the cover, so you might pay $10’000 in premiums for a $5000 funeral eventually. Based on the average life expectancy, economists have calculated that taking out funeral insurance at the age of 65, your premiums will be much higher than the value of the insurance by the time you are 91. So you should think about your family history and current health situation before jumping into a policy.

With most insurance policies, you will only pay funeral insurance until age 90, then coverage becomes free. Most Funeral insurance premiums will be more expensive the older you are, so it’s inexpensive when you are 25 but much more expensive when you are 72. Some policies have fixed premiums for the entire duration of the policy.

It really pays to read the fine print of insurance policies because they can vary a great deal in regards to other specifics. With many policies the benefit amount increases over time but some have a fixed benefit throughout the entire policy. Some policies have a restriction on accidental death in the first couple of years of the policy. Some polcies are more expensive if you are a smoker or more expensive if you are a male (because they die earlier than females).

Instead of a funeral insurance policy (or in conjunction with one), there are other ways to cover funeral expenses that should be considered:

Prepaid Funerals will pay for a part or all of the funeral costs, at todays prices. That means if it costs $5000 to bury you today, despite possibly costing more in the future, you are still covered. There are a number of ways to pay for a prepaid funeral:

  • Pre-purchased funeral items: you pay for small parts of the funeral individually. Buy a tombstone first, then buy a plot and so on.
  • Contributory Funds: you make small regular payments that add up over time and contribute to the cost of your funeral, this may be a partial payment
  • Prepaid Funerals: You choose the specifics of your funeral and make small payments over time

Funeral Bonds are also offered by insurance companies and some friendly societies. You can make a lump sum payment or pay by installments and the money is invested, to be paid out when you pass away. It cannot be accessed for any other purpose and can only be paid to the name you specify.

Life Insurance may also be an option instead of funeral insurance, depending on your age and ability to qualify. It will be more expensive than life insurance but if it is not cost prohibitive it can be of great benefit to a family after your death.

Doing the sums

So how does funeral insurance come up against these other options? Well it will largely depend on the specifics of the policy and your personal details. Taking a run of the mill funeral insurance policy with an increasing premium and payout, if you are aged 65 when you take out a policy for $6000 of funeral insurance (numbers rough estimate):

  • If you die at 66 you will have paid $500 in premiums and will be paid $6000 by insurance (roughly +$5500 difference)
  • If you die at 71 you will have paid $3830 in premiums and will be paid $7600 by insurance (roughly +$3800 difference)
  • If you die at 76 you will have paid $9560 in premiums and will be paid $9770 by insurance (roughly +$200 difference)
  • If you die at 81 you will have paid $20,300 in premiums and will be paid $12,400 by insurance (roughly -$7840 difference)
  • If you die at 86 you will have paid $40,900 in premiums and will be paid $15,900 by insurance (roughly -$25,000 difference)

So as you can see, there quickly approaches a point where funeral insurance is not providing good value for money compared to other methods for paying for your funeral.  If you consider yourself somewhat healthy and have a good family history of long living it may be wise to consider other methods for covering funeral expenses.

Term Life Insurance in Detail

Term Life Insurance

Term Life Insurance

The Term Life Insurance policy is one of the most common types of insurance policies in the market. It is a life insurance policy that provides coverage for a fixed term at a fixed rate of payments. So you can obtain a policy agreement for a certain number of years at a fixed cost.

After that fixed period expires, the coverage expires and the insured party must reapply for coverage and must renegotiate the rate of premiums. If the insured party dies during the term of the life insurance policy, a payout is given to the beneficiaries of the policy.

Term Life was the original type of Life Insurance available for sale. Nowadays you can obtain other variations of life insurance including permanent life insurance policies like whole life insurance and variable universal life insurance. Those forms of policies extend over your entire life and have established premiums over that entire period. In contrast, term life insurance providers can refuse to renew your policy once you reach a certain age or have a certain type of illness occur.

Term life insurance is most often used as a income replacement strategy, so when the insured party dies, the income that would have been provided throughout their working life is covered by the insured amount. It is useful to insure the bread winner of the household, so if they pass away, the family has enough money to pay off their mortgage and cover living expenses. Other costs that the insurance might need to cover include car repayments, college debt, funeral costs and the ongoing costs associated with dependents.

The smallest amount of term life insurance provided by most companies is a single year. The level of premium is based on the probability of the insured party dying in the time period.

Providing proof of insurability

There are various restrictions as to the people that insurance companies will accept as term life insurance policy holders. You will have to demonstrate your “insurability”. For example, if you had a serious terminal illness which meant you had a high chance of dying within the next year, the insurance company would not accept your application.

You will have to see a doctor to determine if you are an eligible candidate for term life insurance. However some term life policies guarantee insurability after your first policy. That means that if you have a 10 year term life insurance policy, they will automatically allow you to renew the policy regardless of medical condition. However, even that sometimes has limitations, so they might accept you even if a medical doctor has diagnosed you with heart disease, but they won’t accept you back if you have terminal cancer.

Annual Renewable Term
Even though the policies can sometimes stretch over many years, most insurance companies allow you to pay for it on a yearly basis, the “annual renewable term”. Even though you are paying on a yearly basis, the length of the policy could be as long as 10 or 20 or 30 years. However with this kind of term, the cost of premiums can rise each year as you get older.

That is in contrast with level term life insurance, which has fixed premiums over the entire length of the policy. So even a 30 year policy with have the same level of premiums (adjusted for inflation) every year. With level term life insurance, the cost of premiums is higher in year one compared to an annual renewable term policy, however you know that premiums won’t significantly rise as you get older.

Most level term insurance policies also allow you to extend the policy at a set rate if the initial policy expires. Some long term policies give you the option to convert the policy into a “whole life policy” or “universal life policy”.

All forms of life insurance use mortality tables to calculate the cost of your insurance. The payouts from life insurance are considered death benefits, so are income tax free.

Top Reasons for Buying Life Insurance

Life Insurance

Life Insurance

When times are tight people often look for ways to save money. Due the the GFC many people have been struggling and opted to cancel insurance policies, despite the risk associated with that course of action. Life Insurance is often one of the policies that people think they can temporarily be without. This article will share some of the top reasons why you should renew your life insurance policy or take one out for the first time!

Life Insurance is protection of the potential loss of income that results from an individual passing away. So if you are the bread winner in the family and you pass away, life insurance will compensate the family for lost earnings. The beneficiary of the life insurance policy will receive the money, ad you can actually nominate multiple beneficiaries in your will.

One of the main reasons for this type of insurance is for peace of mind. What would happen to your family if you suddenly died in a car accident? Would they be able to pay the mortgage or would they be living on the street within 6 months? Life Insurance would replace your lost income so the family can maintain the same standard of living.

Life Insurance is also useful for paying any medical bills associated with your death. What happens if you were in a car accident, then in a coma for 6 months, wracking up $500’000 in costs while in hospital? Could your family afford the bill or would they be forced to sell the family home. Life Insurance provides a financial buffer for the family ad allows them to hopefully keep the family assets secure. You wouldn’t want to be the cause of your family losing their home would you?

Life Insurance is also fantastic for taking care of any other bills associated with your estate. What happens to your car payments, mortgage repayments, credit card bills if you suddenly pass away? Your family inherits all of that debt. A Life Insurance policy will allow your family to take care of those bills and instead of worrying about their financial stability, they can grieve then get on with their lives. If you are carrying a lot of debt, you don’t want to burden your loved ones with it.

This kind of insurance can also provide for your children’s future. You could have enough life insurance to pay off your mortgage as well as leave them a healthy deposit for their college fees. This can make a real difference in the quality of their life.

Life Insurance can also provide some emergency cash for your family. At a timne when your family is in grief over your death, you don’t want them to be struggling financially.

Naming An Insurance Beneficiary

Insurance Beneficiaries

Insurance Beneficiaries

After all of the work you may have gone through in finding the right insurance policy to suit your circumstances, you might think that most of the work is done.  Well not quite, you are still to face what can be one of the hardest decisions in your life – determining who will be the beneficiaries of your life insurance policies.  The beneficiary is the person named in your life insurance policy as the one to receive the payout after you die.  You can also name multiple beneficiaries and split the proceeds of the life insurance in any way you choose fit.  There are some limitations as yo who you can select to be a beneficiary, so read on to find out!

In the United States, a few states require you to choose someone who is related to you in some way. So you are required to choose a child, spouse or other close relative.  Other states have no such stipulation so you can name any entity you can think of as a recipient of the money.  You can also name your estate as the primary beneficiary of your will, which means that the money goes into your estate and will be divided according to your will.  Just be careful if you owe money though – any money going into the estate will also be available to creditors.  Your children may not see any of the money if you have a lot of debt and don’t put them as key beneficiaries.

Additionally there are also a number of different types of life insurance beneficiaries.  Irrevocable beneficiaries can’t be changed without your consent, while revocable beneficiaries can be.  Changing beneficiaries is as simple as lodging a form with your insurance company, so be careful with who has access to your paperwork in your final days!  There are also different types of beneficiaries – primary are the main beneficiaries, secondary or contingent are the second level of beneficiaries.  So if your primary beneficiary dies before you do, the money will go to the secondary beneficiaries.  There is no limit to the number of beneficiaries you can include, so you can make a complex and detailed list as long as you also note the split of the life insurance each party receives.  Most people use simple percentages to determine which parties receive what amount as the total value of the policy changes over time.

It is crucial that you name beneficiaries specifically because in the past people have run into all sorts of problems with money going into their estate and not being distributed in the way they had intended.  Beneficiaries also receive the money from life insurance almost immediately, which avoids any costs like probate fees, that might be attached to the dividing of assets in your will.  Also remember that if you name a child as your beneficiary, they will need a guardian or a trust to handle the money until they are of suitable age.  If you don’t, the court may appoint a guardian for the child and their decisions may not be as you intended.

You should always keep your beneficiaries up to date because life changes rapidly and you might have more children, get divorced, get remarried or have a falling out with a relative.  Make sure you keep it up to date or your assets may go to some undesirable party!

Age Limits For Life Insurance

Life Insurance Age Limits

Life Insurance Age Limits

Life Insurance is one of the most important purchasing decisions you can make because it affects not only you but your entire family and any other dependents.  A life insurance policy is designed to compensate your loved ones when you pass away.

However there are restrictions on what age you can buy life insurance and this article will give you a general overview on the types of life insurance and the age restrictions for those kinds of policies.

There are two types of life insurance available to purchase in the United States.  The first type is called “Term Life Insurance”.  It is a form of impermanent insurance, which means the insurance policy contract needs to be renewed at specific time periods (usually yearly).  The other form of life insurance is “Permanent Life Insurance” and that covers your entire life on the condition that you continue to pay for the insurance.

Generally life insurance policies have a cut off age of 85.  Once past the age of 85 people are considered ineligible for life insurance.  However, if you bought a permanent life insurance policy previously, you can continue payments past the age of 85, right up until your death.

Statistically speaking, most people don’t live long past the age of 85, many dying well before that age.  The cost of premiums for Term Life Insurance will also rise with age – so if you are 80 years old, your insurance will be more expensive than if you were 20 years old.  It is simply not economical for insurance companies to provide insurance to anyone past the age of 85 because the premiums paid will not cover the insurance payout.

One of the reasons many older people are turning towards funeral benefits policies is that they are no longer eligible for life insurance, but wish to cover some of the costs associated with their passing, such as the funeral.  When the average life expectancy in a country increases, insurance companies might raise the insurable age, but unfortunately in the United States the trend has been in the other direction with people dying earlier.

Permanent Life Insurance is usually the best option if you have a healthy lifestyle, good genes and expect to lie past 85.  You can just continue your policy and know that your loved ones will receive a payment even if you die at the ripe age of 100!

The Right Life Insurance For You

Life Insurance

Life Insurance

Insurance has become one of the fastest growing markets in the past decade, mainly because it remains a necessity in a lot of countries, like the United states. There are many providers that promote a ton of insurance policies, and so, the purchaser often will get bewildered about the most beneficial insurance coverage. Prior to spending money on life insurance, consider the advantages and disadvantages of various insurance coverage to enable you to finally wind up deciding on the most suitable policy.

Down the page, you can look at a lot of kinds of policies, and familiarize yourself with all of the options in order to short list the most beneficial policy to suit your specifications completely.

Let’s talk about the pros and cons in term life insurance. It is a affordable type of cover, which allows the clients to obtain life cover with larger sized payment values that can pay for up to their annual earnings of up to 10-20 years. It’s extremely very easy to invest in this style of insurance coverage. You need to simply learn the length of time paid out and additional specifics of the insurance plan, and also the monthly payments aren’t huge.

As you know that the main goal of a life insurance is to provide something to the family members when you pass on. So, it would be the better choice to purchase the term insurance plan to take care of the longest possible time period; normally the highest tenure is 30 years.

On the other hand, when the term comes to an end, if you want to commence a brand new one, you must begin right from the start. In the case of health problems, you might not be an eligible candidate for the coverage. Also keep in mind, if you cancel or outlive the life insurance policy, you aren’t getting any reimbursements; so, don’t expect any dividends on a term life insurance policy.

Whole life insurance does not ever come at a cheaper price; however, it grows to a potential savings account or even a type of pension account that could come to be really invaluable right after retirement. It won’t attract any taxation, so you can be assured that you will end up undoubtedly benefited after retiring from work.

Whole life insurance is a long-lasting contract for accruing capital, and you will be guaranteed that you are left with a reasonable amount of money after maturation. This insurance policy can become an excellent technique for estate planning; pay-outs right after your demise could be useful for taking care of the estate bills.

On the other hand, it is high-priced too. Should you confront any problems in making these installments, you will need to look to a term policy. Obviously, you can browse on the web for the most beneficial life insurance estimates.

With this type of policy, you are able to save some funds for your retirement on your own. But, on the downside, it also requires large maintenance fees and additional fees, which decrease the overall proceeds.

Getting Value For Money Life Insurance

Life Insurance

Life Insurance

Life insurance coverage isn’t just about subscribing for one plan and then expecting the cash to return in when you get into hardship. It is also about preserving capital. So each time you’ll need to get insurance, contemplate the prices. The money life insurance protection saves is similarly as important as protecting your life as well as your family members lives when some thing unanticipated transpires.

But how would you spend less capital on life insurance policies? Exactly what are the factors which you should really take into consideration? Listed here are 6 strategies that you simply really should take note of when you are checking out insurance protection terms and conditions and do not want to spend an excessive amount of money.

Look to your needs plus the preferences of the loved ones. For you to spend less capital, life insurance web based calculators are useful in aiding you understand simply how much you may need to cover right until the retirement of your respective spouse or till your children finish their school education. Web-sites such as Life and Health Insurance Foundation for Education assists you to estimate your charges by means of their calculator.

Pick a term-life coverage. From 20 years old to around 50, you will need to opt for the term-life, as this can be the easiest technique to avail of mutual savings life insurance protection. For persons who’re over the age of 60, cash-value life insurance could be the more desirable method.

Get rates from web based resources. There are lots of online websites that will present you with prices. Amongst these checkout, InsWeb, and These web pages can help you with the prices you need. Just be prepared to undertake a detailed application procedure and professional medical exam.

Maintain good shape. Companies really don’t give out insurance policies to individuals who are quite sickly. In an effort to get into much better shape and come to be eligible for insurance policies, you will need to stop the vices that happen to be damaging to your wellbeing, such as cigarette smoking and consuming excessive alcohol. You may also try getting a couple of clinical exams to see how healthful you now are. This way you know in advance how to proceed whenever you eventually apply for a plan.

Get qualified help and advice on what to acquire. You may search for the assistance of a good financial advisor or you can buy directly from your insurance coverage company. You may also acquire by means of an insurance agent or acquire through a financial planner who is commission-based.

Study and evaluate. As a way to understand how much capital you may be conserving, you will need to accomplish your research. Put aside time for you to research and find skilled assistance if you need to.

Purchasing Life Insurance

Life Insurance

Life Insurance

A lot of people display confusion with regards to choosing life insurance policies, given that they do not have all their facts right. In basic terminology, life insurance may be defined as being a agreement concerning an insurance company plus a particular person. The arrangement states that if an person dies, the insurance corporation pays off a particular amount of money to their loved ones.

To restrict the liability of the insurance coverage company, the contract defines exact ommissions of protection. The most basic exclusions are suicide, war, riot, fraud and civil turmoil. Basically, life insurance is actually a agreement that’s legal in nature, where by the terms and conditions from the agreement stipulate the constraints of the events insured. Before a person should buy life insurance coverage, it’s probably advisable to get acquainted with all the differing types supplied inside the market. There are two major groups, that are:

1. Investment policies- The principle principle of those polices is always to support the expansion of money by solitary or steady monthly premiums. Typical examples of such insurance policies are variable-life, whole-life and universal-life policies.

2. Protection policies- These kinds of insurance policies aim to offer reimbursements in the event of precise incidents, in form of one time payment recompense. A common form of a policy of this nature is term insurance policies

Several policies govern life insurance. One example is, ‘whole life policies’ give individuals with cover during their total lives instead of for fixed time periods. Depending using the design of the arrangement, the insurance firm may need to have the policyholder to make ongoing contributions to support the life policy.

In most scenarios, these contributions grow because a human being gets older, due to the amplified probabilities of facing death. Typically, the manufacturers base full life policies on investment as a result upcoming gains will hold fluctuating dependent together with the economic functionality.

In case you are considering purchasing a life insurance policy but usually do not know the place to begin, there isn’t any need to lose heart. Essentially the most suitable technique to becoming knowledgable is by assessing as many forms of life insurance as you can handle. One of many very best tips on how to come across this facts is on the net, where you will come across web sites devoted to assisting you find the best suited coverage.

A very good rule one need to utilize just before making a purchase is that the policy must be worth no less than seven times your annual earnings. That can ensure that the benefits will probably be sufficient to protect your loved ones just after you will be no longer on this globe. Many components that figure out the prices of those insurance policies involve:

1. The kind of insurance plan business one employs

2. The sort of insurance policy a person chooses

3. Risky behaviour such as smoking

4. Overall health of the particular person

5. Age and gender of the person