You’ve spent your whole life saving and investing so that you can have enough money to retire with dignity, but there’s one huge question that remains unanswered—who should get your life insurance payout if you die? The general rule of thumb states that you should name your spouse as the beneficiary of your life insurance policy, but this rule isn’t right for everyone. In order to make sure that your family gets the money they need after you die, you should consider these five factors when choosing who to name as your beneficiary
Step 1: Write Down Your Options
There are several types of life insurance to choose from; here’s a breakdown of each: Term life insurance : This type of policy covers you for a specific period and pays out upon your death. In general, term policies are much cheaper than other types of life insurance, but they’re only worth it if you need coverage for a limited time.
Step 2: Meet with a life insurance agent
Once you’ve selected a beneficiary, meet with a life insurance agent to determine how much life insurance you need to cover your dependents. A good place to start is asking yourself how much money it would take for your family or significant other to pay off all their debts and then live on for at least two years.
Step 3: Take the time to learn about your life insurance options
There are several different types of life insurance, and each has its own cost and benefits. For example, whole life is a permanent policy that you can keep for as long as you like; term life is a much cheaper option—but only until your death. Once you’ve purchased either type of policy, it’s time to decide who should receive your money if you pass away. Does your spouse need it to cover bills or start a business?
Step 4: Set up your online account
It’s easy to set up an online life insurance account with any company, but you’ll need: your ID, Social Security number and current address. Choose a trusted insurance provider and explore your options to find a policy that fits your needs at a price you can afford.
Step 5: Obtain quotes
Before you purchase a life insurance policy, it is important to obtain some quotes. While you may be tempted to go for the cheapest policy, it is best to consider other factors as well. You should look at your medical history and existing coverage first before looking at price. You will have to sign a legal contract with an insurance company that says they will pay out on your death. It’s important that they are reliable and won’t try to weasel out of paying after you die.
Step 6: Choose your beneficiaries
When creating a life insurance policy, there are two ways to determine who your beneficiaries will be: You can select them yourself or have them appointed by a will. If you’ve designated someone in your will, make sure you update it if that person remarries or has any children. These things could change which people qualify as your beneficiaries.
Step 7: Choose what type of policy you want
You can purchase a permanent life insurance policy, which continues to protect your beneficiaries for as long as it remains in force. You may also choose to buy a term life insurance policy—that is, one that’s in effect only for a limited amount of time (typically from one to 30 years). While term policies are more affordable, they’re also not guaranteed: When your coverage expires, so does your protection.
Step 8: Make final decisions
At some point you’ll be done—you won’t find anything more you can do to cut costs or earn additional income. At that point, consider your final budget and make a few more assessments: How does your total budget look now that you’ve considered all of these variables? Are there still any opportunities for trimming costs or earning more income? If so, go back through and make adjustments based on what’s changed since your original budgets were created.