It’s probably the last thing you want to think about but important to consider, especially as we continue to weather the storm of a global pandemic: What would happen to your loved ones in the event of your death? Do you know who would receive your life insurance benefit? Do they know your plan?
We know educators have a lot on their plate—and that this kind of planning can be overwhelming. But there’s one simple thing you can do right now to settle some of your affairs, and it starts with your life insurance policy.
A standard life insurance policy offers a benefit to your loved ones after your death to help settle affairs and manage other costs. That’s comforting news, but it can be more difficult for your loved ones to access this benefit if you don’t name them as your beneficiaries.
It’s simple to do. Here’s everything you need to know.
What is a life insurance beneficiary?
A beneficiary can be one or more people, a trustee of a trust you’ve created, a charity or your estate. If you don’t name one, your life insurance benefit will automatically go to your estate—essentially the things that make up your net worth, including any debts1—before any family or friends. When this occurs, it can slow down the payout process significantly and may reduce the amount provided to your loved ones.
There are also different types of beneficiaries. You can list both primary and contingent beneficiaries to map out a more detailed plan of where you’d like to see the money go in different circumstances. Your death benefit will be paid out to your primary beneficiary, then your contingency beneficiaries will be paid if the primary has died or cannot be found.2
Why should I name a life insurance beneficiary?
Naming a beneficiary is a way to take care of your loved ones after you’re gone and to ensure your life insurance benefit gets to them quickly. Rather than leaving them to guess your wishes, it spells out where you’d like your life insurance benefit to go and can make the difficult days after your death easier to manage. Those funds can then be put toward expenses related to your funeral and settling your estate, further relieving the stress placed on your family and friends.
I selected my life insurance beneficiaries years ago. I’m done, right?
Not so fast. If you’ve experienced life changes since your last update—think divorce, marriage, adoption—you may want to update your beneficiaries. It doesn’t matter if you’ve updated your will to include your new husband, if he’s not listed as a beneficiary, he will not receive your life insurance benefit. This is because beneficiaries named in a life insurance policy can override who is named in a will,3 making it crucial that you regularly check your beneficiary list to ensure it’s up to date.
How do I choose my life insurance beneficiaries?
Review your life insurance policy and take a look at your beneficiaries list. If it still looks good, you can rest easy—you’re done. If your list is incomplete or outdated, now is the time to update it. List each person in detail, including their full name and Social Security number, if possible. This helps ensure that they receive the benefit quickly, which can lessen the immediate burden of funeral and burial costs.
How will my life insurance beneficiaries know I’ve selected them?
When you name your beneficiary, it’s important to let the person or charity know that you’ve named them, along with pertinent details like the benefit amount and the name of your carrier. This will help things go more smoothly after your death and ensure that they know they’re entitled to a claim. After all, if they don’t know you wanted them to receive some of your benefit and your carrier is unable to locate them, they may not take the steps needed for that to happen.
These conversations can be difficult, but it’s important to let your loved ones know your plans and wishes. Ensuring that you’ve registered your beneficiaries and discussed your plans with them can bring peace of mind to all involved.
As an NEA member, you have NEA Complimentary Life Insurance in your name, including up to $1,000 of term life insurance and up to $5,000 of accidental death and dismemberment (AD&D) coverage. Take a few minutes to update your beneficiary list today. Visit neamb.com/free-tote or call us at 1-855-632-5433.
NEA Complimentary Life Insurance coverage is issued by The Prudential Insurance Company of America, Newark, NJ. The Booklet-Certificate contains all details, including any exclusions, limitations and restrictions, which may apply. Contract Series: 83500. CA COA #1179. NAIC #68241.
1. How To Make Your Estate Plan, Rocket Lawyer, https://www.rocketlawyer.com/estate-planning-guide/what-is-an-estate.rl
2. What is a beneficiary?, Insurance Information Institute,2020, https://www.iii.org/article/what-beneficiary
3. The Balance, Why Beneficiary Designations Override Your Will, 4/12/2020, https://www.thebalance.com/why-beneficiary-designations-override-your-will-2388824