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. A life insurance beneficiary is the person that the policyholder names to receive the death benefit.1
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.2 There are also some potential life insurance beneficiary tax benefits that can impact your decision.
Once the life insurance policyholder passes, the death benefit must be distributed to the beneficiary. This is the person who receives the life insurance payout. 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
Choosing the right life insurance beneficiary is essential. Policyholders may purchase life insurance to help their spouse cover mortgage payments, everyday bills or to fund their children's college education.”5
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.6
The policyholder can choose to name a single beneficiary or a primary beneficiary, and one or more contingent beneficiaries. A contingent beneficiary would receive death benefits from the life insurance policy if the primary beneficiary passes away.7
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.8 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.9 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.
Don’t wait until it’s too late. Help cover yourself and your family with affordable coverage from Aflac.
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.
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.10
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.11
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.12
At Aflac, there are some life insurance policy options that do not require the hassle of any medical questions or exams. You can also take the coverage with you wherever you go, even if you change jobs or retire in a new city. Our plans can help make a big difference in the lives of your loved ones in the event of a loss.
Explore your life insurance options.
1-12 Investopedia. How Does Life Insurance Work? Updated: May 23, 2022. Accessed: November 1, 2022. https://www.investopedia.com/articles/personal-finance/121914/life-insurance-policies-how-payouts-work.asp.
Content within this article is for informational purposes and does not constitute legal, tax or accounting advice regarding any specific situation. Coverage may not be available in all states. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies/riders have limitations and exclusions that may affect benefits payable. For complete details, including availability and costs, please contact your local Aflac agent. In Idaho, Oklahoma, and Virginia, Policies ICC64100–ICC64300 and ICC64500; Policies ICC1368100–ICC1368400; In Arkansas, Policies A64100AR-A64300AR and A64500AR; Policies ICC1368100–ICC1368400; and Policy Q60100CAR. In Idaho, Policy Q60100CID. In Oklahoma, Policy Q60100COK. In Arkansas, Idaho, and Oklahoma, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C.
Aflac coverage is underwritten by Aflac. In New York, Aflac coverage is underwritten by Aflac New York.
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