You probably already know that your life insurance allows you to name a beneficiary – the person who receives the death benefit when you pass away. People get permanent life insurance like whole life insurance or universal life insurance for a number of reasons, such as to leave a legacy for adult children or dependent family members, to leave a gift to a charitable organization, or even to help a business partner buy out shares in a mutually-owned business. No matter who you name as your beneficiary, here are a few things to discuss with them.
Inform them that they’re covered
You’ll want to ensure that you’ve informed your beneficiary that they’re covered by your life insurance policy. Let them know and answer any questions they may have about what being a beneficiary means. If you have more than one beneficiary, you may want to let each party know how much of the death benefit they’ll receive. For instance, if you’ve named both your adult child and a charitable organization as beneficiaries, let them know what the split is.
Keep their contact information updated
It’s common for people to move to a different city or country for a new job or opportunity. If a beneficiary moves without updating their contact information, the insurance company could have a hard time finding them when the time comes. If your beneficiary’s contact information changes, have them send you the new information so you can update the life insurance company.
How to claim the benefit
Give your beneficiary a brief overview of how they can go about making an insurance claim once you’re no longer around. The process can vary depending on the insurer, but generally, a beneficiary will need to inform the insurance provider of the policyholder’s passing, after which the insurance company will let them know how to submit a claim. A beneficiary may need supporting documents such as the policyholder’s death certificate. Beneficiaries can usually file a claim online, though this process can vary as well.
The importance of being proactive
Typically, the insurance company typically does not immediately know that the policyholder has passed away – so it’s important for beneficiaries to come forward with their claims. To expedite the process, the beneficiary should notify the insurer as soon as possible and gather any relevant documents. Let your beneficiary know that it’s important to be proactive and walk them through how to contact the insurance company.
The bottom line
As a policyholder, it’s a good idea to talk to your beneficiary or beneficiaries on what to expect. Let them know what it means to be a life insurance beneficiary, talk them through the claims process, and let them know the best way to contact the company when the time comes.