How To Choose A Final Expense Beneficiary

When you purchase a final expense life insurance plan, you can choose a beneficiary to carry out the goals of your plan—this can be one or more people you can trust. Here are some useful insights to help you make that decision.

What is Final Expense Life Insurance?

Final expense life insurance is a type of life insurance policy intended to cover the cost of a burial or cremation. They can also be used to pay for medical bills, debts and final expenses.

For these policies, you will:

• Pay Premiums: This is referred to as the “accumulation phase.” For the lifetime of the policy holder, you will make recurring monthly payments known as premiums for your plan. You can also choose to make these payments all at once. The amount you pay depends on your age, your health, and the rate set by the insurance carrier.
• Choose A Beneficiary: With a final expense plan, the payout will be distributed to designated beneficiary or beneficiaries when the policyholder passes away. The amount paid is the amount of coverage you choose when you purchase the policy. Usually between $2,000 and $40,000. You should discuss the use of the payment with the your beneficiaries. 

The structure of a final expense plan, then, is based on that final payout. It can be used for various expenses such as funeral planning, medical bills, estate taxes, and more.

Essentially, as long as it is within the budget of the payout, your beneficiaries can cover it. The use of this payout is reliant upon one or more designated beneficiaries.

What is a Beneficiary?

A beneficiary is a chosen individual who will receive the death benefit payout. It is up to that individual to ensure the money goes towards the burial or cremation costs.

The insurance company will give the funds to this person (or people), and it is up to them to use it from there. You can understand, then, why choosing a trustworthy, stable, and accountable beneficiary is so important for a final expense plan.

Beneficiaries for a Final Expense Insurance Plan

More often than not, final expense policyholders will choose a family member or loved one as their beneficiary. This is a great option for many people, as it often means going to someone you can trust. 

However, keep in mind that a life insurance policy cannot be written into your will. That means that, once the funds are in the hands of your beneficiary, they are not legally required to follow through with your desires for the payout.

Don’t assume that your chosen beneficiary will carry out your final wishes. Make sure it is someone that is responsible with money and will make sure all financial responsibilities are taken car of.

Have discussions with family members and friends to keep them accountable, and make sure they understand what you would like them to do with the money when you are gone.

Be Specific, Thoughtful, and Prepared

To make sure your beneficiary handles your final expense policy well, there are a few things you can do:

• Be Specific: If you have detailed needs that you want your beneficiary to carry out when you are gone, make sure they know! Set up various means by which they can easily carry it out, such as making arrangements with a funeral home or establishing a bill payment with a healthcare provider.
• Be Thoughtful: Understand that this is a huge responsibility for your beneficiary as well. You can help relieve some of this burden by naming multiple beneficiaries, each receiving their own funds from the payout to use in a specific way.
• Be Prepared: Make sure you account for possible mishaps with your beneficiaries. You need to name a primary and contingent beneficiary—the former to be your intended receiver and the latter as a backup if something happens to the primary. You will not only, then, have to decide on a trustworthy primary (or multiple primaries), but a trustworthy contingent (or multiple contingents) as well.

What to Look For and What to Avoid When Naming a Beneficiary

The thought and preparation necessary in choosing a beneficiary may overwhelm you. Or, perhaps you now have someone in mind. Whatever the case may be, there’s more you should look out for. 

Almost every insurance professional agrees that you should avoid naming a minor at all costs. While you may love and trust them to handle your payout, there are many laws and legal hoops they will have to jump through.

More often than not, a minor can only hold a certain amount of funds themselves at a time, the rest deferring to a parent or legal guardian. This creates a slew of problems that are just easier to avoid in the first place.

Also, keep in mind the needs and status of your beneficiary. If they are receiving Social Security Income (SSI) or Social Security Disability Income (SSDI), receiving a large sum of money through a life insurance policy may disqualify them from their benefits.

If you think you may want to change beneficiaries later on, avoid the irrevocable clause. When you choose your beneficiary, the contract will decide whether they are a revocable or irrevocable beneficiary.

Irrevocable means that you do not have the option to change your mind later on, thus locking you in with the original beneficiary you chose.

While your will cannot override your life insurance policy, having the two agree with one another will greatly increase the likelihood of your beneficiary following through with your goals. If they do not agree with one another, the insurance policy will win out, and your beneficiary can do as they please.

We Specialize In Final Expense Life Insurance—Call Today

Although talking about final expenses is never a fun topic to discuss with your loved ones, knowing that you have a plan in place can be very beneficial. Finding the right policy to meet your needs requires a company that knows the industry inside and out.

Get everything you need in a final expense insurance policy. Call Final Expense of America at 1-888-232-2343.