Top Beneficiary Mistakes to Avoid

You can have the right life insurance and still leave your family waiting. The reason is often one small line on a form: the beneficiary.

I have seen how much a policy can do for a family. I have also seen how easily a simple mistake can slow it down.

Before I list them, Take the 60-second Family Protection Checkup. It is a quick way to see whether your plan has gaps. Then come back for the four mistakes.

Mistake 1: Out of date names

Marriages, divorces, births and deaths change who you want named. A policy does not update itself. Check every policy and account once a year. This means that if you get a divorce and don't update your beneficiary, your ex is going to get the death benefit not your current spouse.

Mistake 2: No contingent beneficiary

If your first choice cannot receive the benefit, a contingent beneficiary is the backup. Without one, the money may take a longer path through the estate.

Mistake 3: Naming a minor child directly

A young child generally cannot manage a large payout, and the process to appoint someone can be slow. Talk with an attorney about whether a trust or custodian fits your situation. Also take a look at kid's policies.

Mistake 4: Never telling anyone

If your family does not know a policy exists, they may not know to look for it. Tell your beneficiaries, and keep your documents in one place. One thing I recommend is scheduling a call with your beneficiaries and your agent. The reason I like to speak to beneficiaries is because sometimes the policy my clients get will pay out in case of illness, not just death. If something happens to my client, it's helpful for the beneficary to contact me and get guidance on how to help. If not the beneficiary, whoever is listed in your estate planning should know what your policy covers.

Two are better than one

"Two are better than one, because they have a good reward for their toil. For if they fall, one will lift up his fellow." (Ecclesiastes 4:9 to 10)

A good plan is not a solo project. Your family is part of it.

Your next step

If you already have a policy, a policy review is a good place to start. You can also read about life insurance and then Take the 60-second Family Protection Checkup. I am here in Chino Hills and happy to help families anywhere in California and beyond.