What is a life insurance beneficiary?
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Asked March 18, 2013
When you buy life insurance, you will be asked to name one or more beneficiaries. This is the person or entity that will receive the benefits of the policy if you pass away. You can name any person, company, or organization as the beneficiary, or you can simply leave the proceeds of the policy to your estate, effectively naming no one as the beneficiary of the policy.
Typically, the proceeds of the policy are left to the spouse, children or other dependents. You can even name dependents as beneficiaries, but set up the policy to pay into a trust fund, and then make regular payments to your dependents as you see fit. You do not have to name a close relative as your dependent, but can name any person you desire.
Another common practice is to the benefits of a life insurance policy to a charitable organization. You are free to choose any organization you want, even private groups. For instance, you could leave the proceeds to the Breast Cancer Foundation, or leave the policy to pay out to your bowling league.
You can also name a non-human as the beneficiary of a life insurance policy. This might be your favorite pet, a company you helped get off the ground, or some other group. Examples of this type of beneficiary would be a cat lover bequeathing the proceeds to the welfare of her cats. In this situation, the money would be placed in a trust and paid out to the person or group which took care of the cats.
You can also name any number of beneficiaries. For instance, you could leave a portion to your spouse and children, another portion to a medical research charity, and another portion could be put towards the family business. How you want the payout to be made is completely up to you, allowing you to control who will have the most to gain from the policy.
Answered March 18, 2013 by Anonymous