When purchasing a life insurance policy, you will be asked to designate a beneficiary. If you then pass away while your policy is in effect, this person (or entity) will receive any proceeds from the life insurance company.

Whether you’re buying life insurance to protect your loved ones, pay off debt, or even establish a legacy, it’s important to pick the right beneficiary. In the end, they will be responsible for ensuring that your assets are managed according to your wishes.

Here’s a look at who you can name as your life insurance beneficiary and what to keep in mind as you choose the right one.

Am I Required to Have a Beneficiary?

You don’t necessarily have to name a beneficiary if you don’t want to. While most insurance companies will ask who you’d like to designate, many of them will also allow you to leave this box blank. In this case, your life insurance proceeds would pass to your estate upon your death, likely passing through probate before being disbursed to your loved ones.

Even if your estate and all assets will simply transfer to your spouse, however, it’s usually still wise to mark down a trusted beneficiary. This allows your policy’s death benefit to be immediately accessible, rather than risk getting tied up in probate courts. This is especially important if you have loved ones who will rely on those much-needed funds.

Who You Can Name as a Life Insurance Beneficiary

When it comes time to pick a beneficiary for your life insurance policy, who is eligible? Well, the good news is that it can be pretty much anyone.  

You may want to consider one of the following to act as your policy’s beneficiary:

  • Your spouse
  • Your parent(s)
  • A trusted sibling
  • The trustee of a trust you have created to manage your assets
  • Your adult children
  • Your estate (which is also the default, if you don’t name anyone)
  • A non-profit organization or charity

What to Consider

Now that you know who your beneficiary can be, it’s time to decide who it should be.

Who You Trust: While you can leave your wishes behind for your beneficiary, the simple fact is that he or she is in control of your life insurance proceeds. Make sure that whoever you name is someone that you trust to disburse funds according to your wishes, and to take care of those people (and even causes) that are important to you, in your absence.

Your Child(ren)’s Age(s): Most of us buy life insurance to protect our children, but choosing them as beneficiaries can be a bad idea if they are underage. Rather than naming a minor child as a beneficiary, consider choosing a guardian or trustee on their behalf.

Who Will Manage Your Estate: When you pass away, who will be responsible for handling your affairs? (This could be your spouse, a named executor, or other individual.) It may make sense to name them as your life insurance beneficiary, especially if they will already be satisfying debts and managing the rest of your assets.

How You Want Funds Disbursed: Depending on your family dynamic, the ages of your children, and even the total value of your policy, you may or may not want the entire death benefit to be disbursed to your loved ones at once.

For instance, if you’re afraid of your college-age children blowing through their share, you can establish a trust that doles out funds according to age and life milestones. Or, you can choose a guardian who will oversee disbursements until your children are old enough to manage the money themselves.

When Your Beneficiary May Need to Change

The beneficiary you choose today may not be the right beneficiary for you in the future. In some cases, you may find that you will need to go in and update your beneficiary on your policy.

A few common reasons for changing your beneficiary include:

  • If you get divorced
  • When your children come of age
  • If your named beneficiary passes away
  • If you establish a trust

Picking the Right Beneficiaries

Choosing the right beneficiary for your loved ones will depend on a number of factors, including your family structure, children’s ages, and even your wishes for the money. It’s important to give some thought to your beneficiary, though, and even update this designation over the years. Doing so will ensure that your loved ones are always protected, even if you’re no longer with them.

Buying coverage for your loved ones is quick and easy with LeapLife. Our platform helps you get matched with A-rated (or higher) insurance carriers providing up to $5 million in coverage, with term plans as long as 40 years.