‘Tis the Season for Reviewing
Take time now to ensure your beneficiaries are up-to-date
IT’S HARD FOR ME to believe that Christmas is just around the corner. Where did this year go??
Christmas is a wonderful time of year, filled with joyous holiday gatherings and quality time spent with friends and family.
One of my favorite childhood memories of the Christmas season is of my family hosting an all-day open house each year on Christmas Day. I always looked forward to having friends, family and neighbors from all around stop in throughout the day to visit…and to have some of my mom’s famous lasagna and home-made garlic bread! She always made enough to feed an army that day; even with seven kids and all those visitors stopping by, there was always plenty to go around.
The Christmas season is a special time of year for family gatherings and making long-lasting memories, but it’s also a great time to review your insurance needs and plans with your family to make sure your intentions are clear and that your beneficiaries are up-to-date.
Here are a few issues concerning beneficiary designations for you to consider, with information reprinted with permission from a recent article in National Underwriter magazine:
First, you are entitled to–and should–name more than one beneficiary to your life insurance or annuity certificate. You can name not only one or more primary beneficiaries but also one or more contingent beneficiaries should something happen to the primary beneficiaries. The primary beneficiary is the first person (or entity) in line to receive the benefits from a policy when an insured dies. To receive those proceeds, the primary beneficiary (or one of the primary beneficiaries if split) must obviously be alive on the date the insured dies. If not, then the insurance company pays what’s known as the “contingent” or secondary beneficiary or beneficiaries.
As I mentioned above, you can name more than one individual or combinations of individuals at either the primary or contingent level. For example, in our most common beneficiary scenarios, an insured would name his or her spouse as the primary beneficiary and their children as contingent beneficiaries.
Suppose you wanted to name both your spouse and your children as primary beneficiaries. No problem: the proceeds would be typically split equally among the named beneficiaries in that particular case, but that can also be adjusted to meet your specific request. For example, suppose you wanted your spouse to receive half of the proceeds and have the remaining half split among your children. Again, no problem: just let your agent know that. (Provided, of course, your children are not minors. More on that issue later.)
When it comes to designating your beneficiaries, it’s critical to be as specific as possible. The beneficiary designation should describe the person with sufficient clarity and certainty so that the insurer can easily identify the proper person or persons and make the proper payment based on your desired intentions. Even where it seems inherently unfair, the insurer is almost always held by the courts to be bound to pay the proceeds to the named beneficiary. There are numerous cases where the proceeds were payable to a spouse long divorced because the insured neglected to designate a new beneficiary following the divorce.
I saw that exact situation happen to a past associate of mine. He was divorced and remarried prior to us working together. I witnessed the shock his second wife felt when he unexpectedly died from a heart attack at age 43. She received an even greater shock when she filed the insurance claim only to be told that she was not the listed beneficiary, and that the proceeds were payable to his ex-wife. You can imagine how that turned out.
The sad part of that story is that this situation is not all that uncommon today, and sadder still is that my associate was an insurance agent. He spent his career providing excellent customer service and advising his clients to make sure they kept their beneficiaries up-to-date, but unfortunately never took the time to practice what he preached.
So, here are some important points to remember when naming your beneficiary:
1. Be specific with name and relationship. As mentioned above, the name supersedes relationship. Legal precedence dictates that the proceeds will be made payable to the person, regardless if they are still your spouse or fiancée.
2. Where possible, always name your children individually rather than by class, such as “all children equally.” If the children are named as a class rather than individually, the insurer may have difficulty verifying who is in that class due to marriages, divorces, adoptions, etc. The term “all my children” may also cause legal problems in cases of illegitimate children, legally adopted children and children from previous marriages. It’s important to note here that step-children–and, in some cases, children born out of wedlock–are generally not included in the class known as “my children.” If your intention is to have them as a beneficiary, they should be named individually.
3. Per capita or per stirpes? This gets a little technical, but think of it this way: Let’s assume you name your three adult children as beneficiaries, and they all have children of their own. Most insureds name their children equally, and the claim is paid “per capita,” or by head count. If you named three and three were surviving when you die, the proceeds would be split three ways. If only two were alive, then it would only be split two ways.
But wait. What about the children of the child who passed away before you? Are they cut out? Not if you designate the beneficiary and use the “per stirpes” provision. The per stirpes (meaning “by the branches”) provision protects the claim for the children of any of your beneficiaries that may predecease you.
4. Naming minor children as beneficiary. Few states allow payments of insurance proceeds to a minor, and even fewer companies would agree to do so because minors cannot give a valid release or enter into a contract with the insurer. For this reason, it’s always best to name a trustee as beneficiary in most cases involving minor children.
As you can see, there’s a little more to naming beneficiaries than you may have originally thought. Fortunately, you can change your beneficiary at any time, and your WPA agent can help you make the right decisions and keep your policy up-to-date for you. Births, deaths, marriages, divorces and adoptions are just a few life events that should trigger you to rethink how your beneficiaries are structured.
Are your current beneficiary designations meeting your desires? During this upcoming Christmas season, why not take some time to give serious thought to your plans, discuss them with your loved ones, and give your WPA agent or broker a call. We’d be happy to review your current situation and make any adjustments necessary to help you reach your desired goals.
Don’t have an agent? Call the Home Office, and we’ll have one assigned to you.
From Bob and Laurin in the Sales Department, we wish you all a very Merry Christmas
and a safe, happy and prosperous New Year!
Very valuable advice