With Few Life Insurance Beneficiary Rules, the Sky is the Limit When Choosing a Beneficiary
When you set out to buy a life insurance policy, you may have already known which type of policy you wanted to purchase and how much coverage you felt you would need. You feel confident that owning a life insurance policy is a wise decision, but the only thing that’s bothered you is how you will choose a beneficiary or beneficiaries for your policy. The good news is that most policies don’t come with many life insurance beneficiary rules so your decision with regards to whom you will make your beneficiary may only be challenged by you.
Really, when it comes to life insurance beneficiary rules, the only things you need to really be aware of concern minors as beneficiaries and making changes to a policy’s beneficiaries when a person is incompetent.
While it will largely depend on the type of insurance policy and provider you choose, many insurance companies will not allow a minor to be named as a policy beneficiary without there being a trust set up. With a trust, the insurance company can pay the policy’s death benefit to the trust that was created for the minor beneficiary without having to go through the legal process. Then, once they’re the age of majority, the beneficiary will have access to the funds.
Another thing to know with regards to the rules surrounding life insurance beneficiaries is that many companies will not allow a policy holder to change the beneficiary or beneficiaries on their policy if they’re deemed incompetent. This is often the case with policy holders who are senior citizens and so it’s recommended that any and all changes be made to the policy before a person becomes ill and/or hospitalized.
Beyond these regulations, a policy holder has the freedom to choose whomever they wish as their beneficiary. In fact, a life insurance policy beneficiary doesn’t even have to be a person, as people often name their businesses, their favorite charity and even their pets as the recipients of their policy’s death benefit.
To learn more about the rules that govern the beneficiary selection process of your life insurance policy, contact your insurance provider.