You name a beneficiary when you purchase a life insurance policy. This designation lets the insurance company know who should receive the proceeds of the policy. Keeping your beneficiary designation current is key to ensuring your life insurance benefits are paid as you desire. By not updating your beneficiary designation, your benefits may go to your estate instead of to those who need it the most.
When life circumstances change, be sure to review and verify your life insurance beneficiary designation. When should you review beneficiary designations? Here are a few situations to consider:
Divorce: Many states automatically revoke the beneficiary designation of a spouse upon divorce, unless your divorce decree and property settlement specifically state that the life insurance policy is to remain for the benefit of the former spouse. The divorce revocation statutes are complicated, though, and have even garnered recent attention from the U.S. Supreme Court. Be sure to discuss your life insurance policies with an attorney at the time of a divorce.
Death: Review your beneficiary designations after the loss of a spouse, parent or loved one. You will need to designate a new beneficiary, if you named the deceased as a primary or contingent beneficiary.
Marriage: If you purchased a policy when you were single or if you remarried after a divorce or death of a spouse, be sure to verify your beneficiary.
Birth or adoption of a child: Leaving a legacy to your children is a goal for many parents. You may wish to establish a trust for the benefit of your children or use the Uniform Transfers to Minors Act as a way to leave money for your child. Both options should prompt a discussion with an attorney.
Trust is no longer in existence or trustee passes away: If you established a trust when you purchased life insurance, be sure to remove that trust as a beneficiary if the trust no longer exists. If the trustee passes away and no successor trustee is named, there could be a delay at the time of a claim. A life insurance company would need a claim form completed by the trustee, so it is important that the trust is valid and that the trustee can claim the proceeds.
Business is sold or closed: If a policy is taken out with a business named as beneficiary, be sure to consider what changes might be needed if that company closes, changes names or is sold to new owners.
Substantial inheritance: Life insurance needs may change if you receive a large inheritance from a family member or spouse. Check your policy to determine if your beneficiary needs updated.
Changes in a will or estate plan: When your will is changed, consider whether life insurance should also be reviewed for similar changes. Life insurance companies follow the terms of the policy at death, regardless of what is stated in the will.
You’ve worked hard to plan for the financial security of your loved ones after your death. Reviewing your life insurance beneficiary designations when your life circumstances change will ensure that your goals are in place and that your wishes are honored at the time of your death. If you have a life insurance policy with The Cincinnati Life Insurance Company and wish to change your beneficiary designation, contact Life Policy Services at 1-800-783-4479.