While zeroing in on a life insurance policy one of the most important thing that should be done is to designate a beneficiary or someone who will receive the financial compensation in the event of the demise of the policy holder. However, choosing the right beneficiary is quite a tricky job it is important to know that the legal requirements and life changes can play a major role in nominee selection process. A beneficiary is the person who is entitles to receive the death benefit from the insurance policy in case of demise of the policy holder during the tenure of the policy. The death benefit paid to the nominee is usually not subjected to income tax deduction. Choosing the right beneficiary for your policy is very crucial while purchasing the life insurance plans. Here we have mentioned some important tips that can help you to decide on your life insurance or term insurance beneficiary.
1. Determine who you want to secure-
It is obvious that any individual doesn’t buy insurance policy for themselves, rather they buy the term insurance or life insurance plan to provide financial support to their loved ones and family. So while going for the final purchase of your life insurance policy it is important to understand that who you want to secure. One can narrow down the choice of beneficiary by thinking about whose welfare you are more concerned about. While some people, wants to leave money for their spouse and children after their death. Others may use life insurance policy to finish their business depts.
2. Check your options-
It is not necessary that the beneficiary needs to be a person. Other than your spouse and children, it can be a charity or estate also. Beneficiaries are normally categorized into three categories primary, secondary and tertiary. The primary beneficiary is considered as children and spouse. The secondary nominee comes into action in case if the insured person and primary nominee dies at the same time. Besides this the tertiary is considered to be the third party nominee that is eligible for death benefits in case if the primary and the contingent are not available. Therefore, I can be any charity, trust or any estate of the insured. Nevertheless, it is always sensible to go for a primary beneficiary rather than picking any third party nominee. Moreover, there are many life insurance policies that do not allow the third party nominee.
3. Consider the circumstances of your beneficiary –
Sometimes the insured decisions to make someone the life insurance plan beneficiary can cause a problem for that individual. For example, if a family member is disable and their income level allows them to take advantage of certain governments benefits, then making them your beneficiary can stop them from availing the government benefits for a long time. It is important to keep in mind that the beneficiary circumstances are as important to consider as the policy holder’s circumstances.
4. Review the policy often-
There are many reasons that may result to change your mind over time or you may want to change your beneficiary. Anytime if the insured experience a life changing event in his or her life then they should consider whether they want to change their beneficiary or not.
5. Make sure your children are covered-
While finalizing the life insurance plans it is very important to note that your children are covered under the policy. So that in case of unfortunate death of the policy holder the child’s future can be secured financially. The life insurance policy provides child plan for the children under which the future of the child is secured.
6. Ensure that your policy matches your will-
One must ensure that the policy is done according to your will. In the insurance contract the insured must officially name the beneficiary because that designation of the nominee will prevail even if some situation comes on.
If you are still confused about finalizing the nominee you can contact to your agent and queries your doubts. Nowadays there are many online life insurance company that provide 24x7 customer assistance service where you can clear all your doubts a queries regarding the insurance policy and make choose the most beneficial plan according to your suitability.