By Dez Duran-Lamanilao

Image source: Macquarie Group

It will take careful planning and consideration when purchasing life insurance. Deciding on who the primary and secondary beneficiaries are may be easy and simple for some but complicated for others. It comes as no surprise if conflicts arise during the execution of a policy. These might happen when the insured belongs to a dynamic and not-so-typical family and the risk of misunderstanding among family members is high. Let us try to lessen that risk by analyzing how your beneficiaries should be named.

There are two basic types of beneficiaries for life insurance:

  1. Primary beneficiary – the person(s) who will receive the proceeds after the insured person’s death
  2. Secondary or contingent beneficiary – the next in line to receive the death benefit if the primary beneficiary dies before the insured

Note that the primary beneficiary will not be entitled to any proceeds if he or she dies before the insured. Similarly, a secondary beneficiary is unable to claim any proceeds if the primary beneficiary is still alive upon the insured’s death.

Who may be your beneficiaries? 

The first that comes to mind will be your immediate family member(s). Or it may be a trust you have initially set up, a charity or your estate itself.

A few questions to consider: 

  • Who will need the most assistance when you pass away?
  • What are the conditions in life of your intended beneficiary? There is a possibility that naming a person as beneficiary will void that person’s rights to government benefits. Which will benefit that person the most?
  • If none of your beneficiaries survive you, will the proceeds be better off in a trust? Or would you rather pass them off to your estate?
  • What are the options should you find a need to change your beneficiaries?
  • For underage children, who will be the best person to act as their guardian? Is this person responsible and worthy enough to be trusted? Will your wishes be fulfilled?

Having a clear understanding of the rights you are according your life insurance beneficiaries should be on top of your priority list if you do not want your loved ones to experience the additional burden of dealing with your policy after you are gone. The choice lies in you alone as to who should you name as your beneficiaries. Make it matter so your loved ones are left with the assurance that you have made a wise choice for them.