A beneficiary is the person or persons that receive the payout of your life insurance policy when you die. Typically when you purchase your insurance policy, you name your life insurance beneficiaries when you fill out the paperwork to set up the policy. The process of selecting your beneficiary is pretty simple, but there are some things you should think about when making your choice.

For example, did you know that not only can you name a person such as your wife or child as a beneficiary, but you can also name your estate or an organization such as a charity as your beneficiary? When designating the beneficiary, you can split the amount received among several parties, giving each one some amount of the proceeds. Note that it is best to specify a percentage of the money to go to each beneficiary rather than an amount. That way if the amount of the policy should change, there is no question as to who gets how much. Also note that there are no limits on the number of beneficiaries you can name.

As with many legal matters, state laws vary, so there are a few things to keep in mind. Some states only allow a relative to be named beneficiary if you are giving the proceeds to an individual. Also some states limit giving money to a minor and require that a guardian be chosen to supervise the spending of proceeds until the child reaches adulthood, usually the age of eighteen.

Sometimes it may be necessary to change your beneficiary. There are two types of beneficiaries: revocable and irrevocable. Revocable beneficiaries are simple to change while irrevocable are not.

A revocable beneficiary is a beneficiary who can be changed at any time without their consent. You as the insured simply fill out a form and submit it to your insurance company and they will make the updates.

An irrevocable beneficiary is a beneficiary who cannot be changed without their consent. If the beneficiary refuses to allow you to remove them from the policy, there is nothing you can do, so it is best to always use a revocable beneficiary.

A contingent beneficiary can also be named on your policy. A contingent beneficiary only becomes a beneficiary if your primary beneficiary dies before you do. This is especially important if you primary beneficiary is an older individual.