Can I Have As Many Life Insurance Beneficiaries As I Want?

Contingent beneficiary documents

When you purchase life insurance, choosing your beneficiaries is a challenging yet crucial step in the process. Who to name as your beneficiaries is something only you can decide. You have the option to name more than one beneficiary, which can be accomplished by assigning a percentage of your life insurance benefits among two or more people on your application. There is no set limit to the number of beneficiaries you can name. However, with multiple beneficiaries, it is best to designate a percentage of the proceeds rather than a dollar amount to each.

Types Of Beneficiaries

There are two basic types of life insurance beneficiaries. Many insurance professionals believe that the safest approach is to name one or more beneficiaries of each type.

  • Primary beneficiary: This is the person or persons who will receive the death benefits when you die. Primary beneficiaries will not receive any life insurance proceeds if they die before you do.
  • Contingent beneficiary: Also known as secondary beneficiaries, contingent beneficiaries do not receive any death benefits if the primary beneficiaries are still living at the time of your death. Contingent beneficiaries only receive life insurance proceeds if the primary beneficiaries die before you.

Classes Of Beneficiaries

Within the two types of beneficiaries, there are also two classes – revocable and irrevocable beneficiaries. Insurance professionals typically recommend the revocable beneficiary option to avoid potential legal issues than may arise with irrevocable beneficiaries.

  • If you name revocable beneficiaries, you have the right to change the beneficiary designation at any time without the consent of the current beneficiary.
  • If you name irrevocable beneficiaries, you cannot change the designation without the original beneficiary’s consent.

What If You Are Naming Multiple Beneficiaries?

If you want to name multiple beneficiaries in your life insurance policy, you have two different options as to your approach:

  • Per stirpes: Life insurance proceeds are passed down and divided equally among beneficiaries and their surviving children. For example, you designate your two children (Tom and Mary) as primary beneficiaries. If Tom dies before you do, Mary receives 50 percent of the insurance proceeds when you die, and the remaining 50 percent is divided equally among Tom’s surviving children.
  • Per capita: Insurance proceeds are divided equally among surviving beneficiaries in the lineage line. For example, as in the example above, Tom has three children, and Mary has none. If Tom dies before you do, upon your death, the proceeds are divided equally (four ways) among Tom’s three children and Mary.

What To Do & Not To Do When Naming Beneficiaries

  • Do not name your estate as beneficiary if you want family members to receive the death benefits. This will entangle the proceeds in probate and potentially create tax issues.
  • Do not name a creditor as a beneficiary.
  • Do not name a minor unless you have designated a guardian for the child.
  • Do not name beneficiaries generically, such as wife, husband, spouse, or children.
  • Do properly identify designated beneficiaries with full names, dates of birth, and/or social security numbers.
  • Do review your life insurance application with our experienced agent to help ensure you have all the bases covered.

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