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How Many Beneficiaries Should I Have On My Life Insurance Policy?


When considering a life insurance policy, you might wonder how establishing beneficiaries works. Are there any limits to the number of beneficiaries you can have on a policy? Can you set up special conditions for their benefits? The details of beneficiaries are worth learning a bit about before you add or remove a life insurance beneficiary to your policy. Having this knowledge can certainly contribute to your peace of mind. You'll know how any life insurance benefits will be split up if you die during the term of your policy.

In most cases, a life insurance policy will have a beneficiary and a "contingent" beneficiary. The contingent beneficiary will receive the benefits if the main beneficiary is unable to take the money for some reason (usually meaning that they die before the policyholder). A common example might be a policy set up to pay to parents as the main beneficiaries, with siblings set up as a contingent beneficiary. You can name as many beneficiaries for either field as you deem necessary, and you can even assign percentages to different beneficiaries. It's up to the policyholder to set this information up when the policy is activated. You are also able to change your beneficiaries over the course of the policy at any time. However, this change may take some time to take effect, so if you're considering any changes you should contact the health insurance company as soon as possible.

For a term life insurance plan, you're likely dealing with a large amount for the benefits, since term life insurance plans tend to pay out much more than whole life plans. This is probably the best type of life insurance policy to split over multiple beneficiaries. Remember that the purpose of life insurance is to take care of your loved ones and ease the financial burden of your death - not to make your beneficiaries rich. Choose a policy that will take care of your family, but isn't anything too excessive. If you are splitting the life insurance policy over multiple beneficiaries, take this into account when you're first buying the term life insurance policy. In addition, if you add or remove a beneficiary later in the policy's term, you may want to adjust the benefits accordingly.

After you've named beneficiaries, you might let them know, so they know to collect on the policy if you die. If that seems slightly morbid to you, you can leave instructions regarding the life insurance policy in a will or with a trusted friend.

Setting up your beneficiaries in advance and organizing contingents is a smart move, and helps you make sure that you're aware of how your benefits will work.

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