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What is a Life Insurance Beneficiary? What You Need to Know

Having life insurance is one of the best ways to help protect your loved ones financially. If you have dependents or intentional, long-term financial goals, a life insurance plan could be a great choice. Owning a plan and choosing the right beneficiary are crucial decisions.

Life insurance can help provide extra security for your dependents if your family is reliant on your income. It can also help you map out your financial goals, estate planning, and long-term decisions like creating a trust.1 There are also some potential life insurance beneficiary tax benefits that can impact your decision. Read on to learn what a life insurance beneficiary is, some common types, and who you should choose to be your beneficiaries.

What Is a Life Insurance Beneficiary?

A life insurance beneficiary is the person or entity the policyholder names to receive the death benefit.2 Once the life insurance policyholder passes, the death benefit must be distributed to the beneficiary. You can choose to name one specific person, a trust, or multiple people as contingent beneficiaries on your life insurance policy.3 Some common beneficiaries for life insurance plans are spouses, family members, business colleagues, charities, and a trust.4

Types of life insurance beneficiaries

There are two main types of life insurance beneficiaries5:

  • Primary beneficiary: A primary beneficiary is the person or entity who is first in line to receive the death benefit payout after your passing. You can name more than one primary beneficiary.

  • Contingent beneficiary: A contingent beneficiary is a backup beneficiary who will receive the death benefit payout if the primary beneficiary passes away or can’t be found. You can also name multiple contingent beneficiaries.

Who Should I Name as a Life Insurance Beneficiary?

Choosing the right life insurance beneficiary is essential. Policyholders may purchase life insurance to help their spouse cover mortgage payments, pay everyday bills, or fund their children's college education.6

There is no specific rule around naming your spouse as the life insurance beneficiary. However, it’s important to understand that a life insurance policy is a legally binding contract, so we urge you to choose wisely.7

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Who Can Change the Beneficiary on the Life Insurance Policy?

There are a few life insurance beneficiary rules that must be considered. Most notably, the life insurance plan is a contract between the policyholder and the insurance company. This means that only the policyholder can change the beneficiary on the life insurance policy.1 However, this is a decision that can be made with a spouse.

It can be a good idea to name a secondary beneficiary in case plans change. Spelling their full names correctly is very important when designating a beneficiary. Children under the age of 18 are not able to receive the death benefit directly, so this must be factored into your plan.1 If you go through a major life event, like the loss of a loved one or a divorce, make sure that your life insurance plan is up to date as soon as possible.

What happens if I don’t name a life insurance beneficiary?

If you don’t designate beneficiaries, it will be more difficult for your loved ones to receive the death benefit payout after your passing. The payout will either be paid to your estate or held in probate. If your loved ones try to access these funds, it may take years to do so. Therefore, it’s important to name your beneficiaries when you get a life insurance policy.

Life Insurance Beneficiary Payout Options

There are a few different options to determine how your life insurance policy beneficiary will be paid out. Keep reading to determine which route is best for you.

Lump Sum

A lump sum payment allows the death benefit to be paid out in one large sum, rather than in timed installments. This is the most traditional route for most life insurance policies.1


On the other side of the spectrum, the death benefit can be paid to the life insurance policy beneficiary in scheduled installments. This allows the policy owner to select a pre-determined, guaranteed benefit amount to be paid out regularly mimicking a typical stream of income for the beneficiary.1

Retained Asset Account

A retained asset account is a great option if you are looking to write checks against the balance of your death benefit. This works well for beneficiaries of larger plans and prompts the insurance company to act like a bank. In this instance, the beneficiary may still be able to collect the interest on the death benefit.1

Learn More About Aflac’s Life Insurance Policies

Designating life insurance beneficiaries can help ensure your loved ones receive the added financial security they need in case of your passing. If you’ve decided life insurance is right for you, consider Aflac’s term and whole life insurance policies. Our plans come with reasonable premiums and extensive coverage, and can help make a big difference in the lives of your loved ones in the event of a loss. You can also take the coverage with you wherever you go, even if you change jobs or retire in a new city. Start chatting with an agent to learn more about our policies and get a quote today.

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