A life insurance policy is a contract between you and a life insurance company. In very simple terms, you promise to make premium payments to the life insurance company. In exchange, the company promises to pay a specific dollar amount to your beneficiary (or beneficiaries) upon your death. You decide who will be the beneficiaries by completing a beneficiary designation form.

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Depending on your circumstances, you may have several choices in designating your beneficiary:

  • Your Spouse
  • Your Children
  • Living Trust
  • Trust Created Under a Will
  • Other Beneficiaries

Your first choice as to who will receive the proceeds at your death is the primary beneficiary. You can name more than one primary beneficiary, in which case, each primary beneficiary will each receive an equal share, unless your designation specifically provides for some other allocation. You should also name a contingent beneficiary. If your primary beneficiary is not living, or if for some other reason the policy proceeds cannot be paid to your primary beneficiary, the proceeds will be paid to the contingent beneficiary.

It is very important to remember that your will (or living trust) will not directly control who receives your life insurance proceeds. Rather, your beneficiary designation form controls the distribution of the insurance proceeds. However, it is possible to give a will or trust control of life insurance proceeds by naming your estate or naming a trust as the beneficiary on the beneficiary designation form. For example, a married couple might establish a trust in their wills for the benefit of their minor children. A typical life insurance designation for that situation would list the spouse as the primary beneficiary with the trustee under the will as the contingent beneficiary.

To get a sense of what a life insurance policy may include, here is a sample life insurance policy.

If you have questions about your coverage, or need to get covered, Rocket Lawyer can offer you a free life insurance review.  Just submit your information at our Life Insurance Center and one of our specialists will contact you.

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