What is a Life Insurance Beneficiary?

You buy life insurance to help financially protect the people you love most, should the unthinkable happen to you. That’s why choosing a Beneficiary or Beneficiaries is so important – it’s the person (or entity) who will receive the payout money from your life insurance policy.

Designating a Beneficiary may seem simple, and it generally is. However, an inadvertent mistake can sometimes lead to major headaches for those left behind.

That’s why it’s important to understand the basics of passing on your assets and how beneficiary designations work.

Types of Life Insurance Beneficiaries

There’s more than one way to name a life insurance beneficiary—and the type you choose can impact how your policy is carried out. While you can name anyone from a spouse or child to a trust or charitable organization, it’s also important to understand the role your designation plays.

Two of the most important distinctions are whether the beneficiary is revocable or irrevocable, and whether you’ve named a contingent beneficiary in case your primary one can’t receive the payout.

Irrevocable vs. Revocable Beneficiaries

Understanding the difference between revocable and irrevocable beneficiaries is key when it comes to flexibility and control:

• Revocable Beneficiary:
  • Can be changed at any time without notifying the beneficiary.
  • Ideal if your circumstances may change over time (e.g., marriage, divorce, new children).
• Irrevocable Beneficiary:
  • Cannot be removed or changed without their written permission.
  • Common in divorce agreements or financial contracts where a guaranteed payout is needed.

Contingent Beneficiaries: Why They Matter

If no Primary Beneficiary is living when the Insured dies, death benefits will be paid in equal shares to the contingent beneficiaries who survive the insured.

While it’s common to name only a primary beneficiary, not having a contingent can lead to unintended consequences, such as:

• Legal delays
• Payment going to your estate and potentially through probate
• Unintended recipients

To avoid complications, always name a contingent beneficiary and keep their information up to date.

What Types of Expenses Can a Life Insurance Beneficiary Pay?

Life insurance payouts, also known as death benefits, generally come in a lump sum and can be used for nearly anything. There are typically no restrictions on how beneficiaries can use the funds.

Here are common expenses life insurance can help cover:

• Funeral and burial costs
• Mortgage or rent payments
• Day-to-day living expenses
• Outstanding debts or loans
• Childcare or college tuition
• Medical bills

Because the benefit is paid directly to the beneficiary (not through the estate), it’s often available faster and used immediately for urgent needs.

Who can be listed as a Beneficiary?

You may select any person or entity to be a Beneficiary of your insurance policy’s benefit amount, in the event of your death. It can be a family member, a friend or anyone else, or even a charitable organization.

Can I name a child as a Beneficiary?

Yes. However, there are additional considerations if you plan to name a child or grandchild as a Beneficiary, and if the child is still a minor (younger than age 18) at the time that Gerber Life receives the insurance claim.

Here are three of the most common, scenarios that may occur when the Beneficiary is still a minor:  

1. A court can appoint a guardian of the minor child’s estate. The guardian can then receive the benefit amount on behalf of the minor child.
2. A trust can be established for the benefit of the child who’s still a minor, in which case the Trustee can receive the benefit amount on behalf of the minor child.
3. We can hold the benefit amount until the child turns 18 or the age of maturity in the state where the child lives.  

Can I list multiple Beneficiaries?

Yes. You can list as many beneficiaries as you wish. The division of the benefit amount can be handled in various ways, and you can specify how you would like to have the money distributed. You’ll want to consult with an attorney for your particular situation, but here are some basic examples:

1. Succession: The benefit amount would be paid to your Primary Beneficiary(s), if surviving. If not surviving, the benefit amount would be paid to your Contingent Beneficiary(s) (your second choice) listed in your insurance policy.
2. Equal division: In cases where more than one person is listed as the Primary Beneficiary, the benefit amount would be divided equally among them.
3. Percentage division: If you wish to name several beneficiaries but have each receive a different benefit amount, you could specify the percentage that each Beneficiary is to receive, but the total must equal 100%. 

How to Designate a Life Insurance Beneficiary (and Common Mistakes to Avoid)

Your life insurance policy is a legal contract—and properly completing the life insurance beneficiary designation is key to ensuring your benefit goes where you intend. While the process is usually straightforward, it’s essential to follow the required steps and avoid common pitfalls.

When naming your beneficiary, be sure to include:

• Full legal names of beneficiaries
• Date of birth
• Relationships to you
• Percentage of the benefit (if listing more than one)
• Current contact information

Even small errors or oversights can lead to delays, legal disputes or the benefit being paid to your estate. To help prevent issues, avoid these common mistakes:

• Not naming a contingent beneficiary
• Using vague terms like “my spouse” or “my children” instead of full names
• Not updating after major life changes (marriage, divorce, birth)
• Naming a minor without setting up a trust or guardian

It’s always a good idea to double-check your designations for accuracy and revisit them periodically. Up next: a closer look at the life insurance beneficiary rules that help guide these decisions.

What Happens to Life Insurance with No Beneficiary?

If no life insurance Beneficiary is named or no Beneficiary is living when the Insured dies, death benefits will be paid according to the policy provisions, concerning Beneficiary.

Changing Life Insurance Beneficiaries

Life circumstances change—and your life insurance policy should keep up. In most cases, only the policy owner has the right to change the beneficiary on a life insurance policy. If the listed beneficiary is revocable, you can make changes at any time, for any reason.

However, if you’ve named an irrevocable beneficiary, you’ll need their written consent to update or remove them. This designation is typically used in legal or financial arrangements where the payout must be guaranteed.

It’s also important to understand that a life insurance beneficiary cannot be changed after the insured has passed away. Additionally, a spouse cannot change the beneficiary unless they are also the policy owner.

Whether you’ve gotten married, divorced, had a child or experienced another major life change, it’s smart to review your policy regularly. You can complete a Beneficiary form to print, sign and mail to us.