The choice of who to name as a beneficiary on your life insurance policy is not one to take lightly. Whoever is listed on your policy will receive benefits as stated by your life insurance once you have passed away.
Do I Have to Put Family Members on My Life Insurance Policy?
Contrary to popular belief, beneficiaries don’t have to be family—not do you have to put family members on your life insurance policy. Insurance agents are not there to make a moral judgement on your decisions over a life insurance policy. They are simply there to help you get the policy that suits your budget and provides enough coverage for your chosen beneficiaries.
In general, you should add individuals who are financially dependent on you.
This often includes spouses and children but may also include parents, non-married partners such as boyfriends and girlfriend, etc. You can generally consider someone financially dependent on you if they will be hit financially by your death.
For example, say you have a husband and a child in a household where you are the main source of income. If you pass away, that main source of income may disappear and leave your family struggling to handle bills and expenses such as the mortgage, car payments, remaining loans or debts, groceries, etc.
A good life insurance policy can help your beneficiaries handle the financial burden after you pass, including debts you leave behind and replacement for lost income. Life insurance also helps cover funeral expenses in what is known as a death benefit, which helps cover burial costs, a casket or cremation and other funeral expenses.
You don’t necessarily have to name people on your life insurance policy, either. You can choose to donate some of your life insurance policy benefits to certain organizations or charities.
How Many Beneficiaries Can You Have on a Life Insurance Policy?
The number of beneficiaries you can have varies depending on your life insurance policy and the type of beneficiaries. There are two types of beneficiaries: primary beneficiaries and contingent beneficiaries. A contingent beneficiary will receive the death benefit on the life insurance policy if something happened to the primary beneficiary.
You can have multiple of each type of beneficiary, although some policies cap at 10 beneficiaries or so. Also keep in mind that the more beneficiaries you have, the less each may receive. Speak with an insurance agent about your life insurance needs.