Types of Beneficiaries
Primary Beneficiary
First in line to receive the death benefit. Can be one person or multiple people with specified percentages (e.g., spouse 100%, or spouse 50% + child 50%).
Contingent (Secondary) Beneficiary
Receives benefits only if primary beneficiary dies before you or can't be located. Essential backup—always name one.
Irrevocable Beneficiary
Cannot be changed without beneficiary's consent. Rare—usually only used in divorce settlements or business agreements.
Who Can You Name as Beneficiary?
âś“ Common Beneficiaries
- • Spouse or domestic partner
- • Adult children
- • Parents or siblings
- • Trust (revocable or irrevocable)
- • Charity or nonprofit
- • Business partner
- • Your estate (not recommended)
⚠️ Special Situations
- Minor children: Needs guardian or trust (see below)
- Ex-spouse: Update after divorce!
- Non-relative: May require "insurable interest" proof
- Multiple people: Specify exact percentages
Costly Beneficiary Mistakes
❌ Naming Minor Children Directly
Insurers won't pay minors directly. Money goes into court-supervised account until child is 18—with fees and restrictions. Solution: Name a trust or custodian (UTMA/UGMA account).
❌ Forgetting to Update After Divorce
In most states, your ex-spouse still gets the money if they're still named. Divorce doesn't automatically change beneficiaries. Solution: Update immediately after divorce.
❌ No Contingent Beneficiary
If primary beneficiary dies before you and there's no backup, benefit goes to your estate—subject to probate and creditors. Solution: Always name a contingent.
❌ Naming "My Children" Without Names
Vague designations cause disputes. Does this include stepchildren? Children born later? Solution: List each child by full legal name.
❌ Naming Your Estate
Benefit goes through probate, visible to creditors, may be taxed, and takes months to distribute. Solution: Name individuals or a trust instead.
When & How to Update Beneficiaries
Update After These Life Events:
How to Update:
- 1. Contact your insurer or log into your account
- 2. Request a beneficiary change form
- 3. Complete with new beneficiary's full name, SSN, relationship, and percentage
- 4. Sign and submit (may need witness/notary)
- 5. Keep confirmation for your records
FAQs
Can creditors take life insurance proceeds?
Generally no—if you name a specific beneficiary, proceeds bypass your estate and are protected from your creditors. However, if you name your estate as beneficiary, creditors can make claims. Also, beneficiary's own creditors may be able to claim funds after they receive them.
Can I name a pet as beneficiary?
No—pets can't legally own property. Instead, create a pet trust and name the trust as beneficiary. Designate a caretaker and specify how funds should be used for your pet's care.
The Bottom Line
Your beneficiary designation overrides your will, so get it right. Name specific people by full legal name, not vague descriptions. Always name a contingent beneficiary. Use a trust for minor children. And most importantly—review and update after every major life event.