Melissa Morris has a BS and MS in exercise science and a doctorate in educational leadership. She is an ACSM certified exercise physiologist and an ISSN certified sports nutritionist. She teaches nutrition and applied kinesiology at the University of Tampa. She has been featured on Yahoo, HuffPost, Eat This, Bulletproof, Vitacost, LIVESTRONG, Toast Fried, The Trusty Spotter, Best Comp...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Apr 24, 2022

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The Brief

  • You can change your beneficiary at any time with most plans.
  • Child beneficiaries may have to wait to receive your death benefit.
  • Life insurance payouts can be used in a variety of ways, not just after-death expenses.

The life insurance beneficiary rules are pretty flexible, and there are only a few hoops to jump in terms of state laws to ensure your money goes where you want. 

What does beneficiary mean? Whether you want to help your children pay for your funeral and debt or if you are going to leave it to a charity, your life insurance death benefit can be left to just about anyone. 

Keep reading to learn more about how to designate a beneficiary and how to pick the right person. We will also go over some basic life insurance terms and how to get life insurance with living benefits in this guide. 

Ready to start planning for your loved ones’ futures? Use our free tool to find local life insurance quotes. Enter your ZIP code to get started.  

What are the life insurance beneficiary rules?

Adult beneficiaries can be anyone you would like to name on your life insurance policy. One limitation is children. If your beneficiary is a minor, they may not be legally allowed to receive your death benefit in your state until they reach the majority age.  

The only beneficiary restrictions are a result of state regulatory interference. For example, in common property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), your spouse must waive their beneficiary rights if you wish to name someone else on the policy. 

A spouse has a legal hold of half of your shared assets in common property states. 

Your beneficiary may also be restricted from receiving funds if they are younger than 18 and the funds are tied with a large inheritance. If your child is still a minor, funds may be delayed, and they may need an advisor to oversee the estate. 

What is a beneficiary?

Okay, we jumped into legal-speak fast. Let’s back up. 

A person who receives financial protection from a life insurance plan is called a beneficiary. According to the Insurance Information Institute, the term refers to a person, charity, business, or fund that receives the benefits of your life insurance policy after you die. 

In short, they are who you are saving your money for in the long run. 

While it is typical to leave most of your assets to your family and close friends, your life insurance policy is its own entity that may go to just about anyone or any group. 

What does life insurance cover? 

Life insurance funds are used differently than health or auto coverage. In the latter policies, you are protecting your current self. Life insurance is meant to save for the future, and life insurance reduces the financial burden on beneficiaries that is associated with your passing. 

This type of coverage uses your monthly premiums to save for benefits that help to pay for after-death expenses, such as funeral costs or debt settlements. However, you are not limited to allocating your money to settling your final affairs. You may also leave a payout. Life insurance provides the funds to those you name upon your death to use how you designate. 

Life insurance may also help you before you die if you are diagnosed with a terminal illness. This option is called an accelerated benefit rider. The funds from this claim help you pay for medical bills and other health-related expenses.

Keep reading to learn about who you can name as your life insurance policy beneficiary. 

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How to Designate a Life Insurance Beneficiary

Suppose you are not sure who you want to name on your life insurance policy. Some questions you may want to ask yourself should relate to your finances and what debt you are leaving behind. 

  • Who are you providing for?
  • Who will need help paying bills after you die?
  • Who is paying for your funeral or other after-death expenses?
  • Do you have any one or any group that you want to leave money to?

Once you have picked your beneficiary or beneficiaries, you need to make it official through a form provided by your life insurance company. Some information you may need to collect from your person includes contact information and identification verification. 

Other details you may need to include: 

  •  Beneficiary’s full name and address
  •  Social Security Number
  • Date of birth

In most cases, your life insurance policy may require you to provide more than one beneficiary if you choose one person to receive your death benefit. 

Multiple, Contingent, Primary Beneficiary Protection

The primary and contingent life insurance beneficiary rules are in the name. The primary beneficiary is the first person listed on the policy. The contingent beneficiaries, or secondary beneficiaries, receive the death benefit if the primary one dies before you. 

If your primary beneficiary dies before the death benefit has been paid out, but after you, the death benefit may go to the secondary beneficiary or the policyholder’s estate. It would be best if you spoke with an expert about the terms and conditions of your life insurance policy.

You may also name more than one person or entity or both in your life insurance policy. If you choose to have multiple beneficiaries, you may choose to allocate varying percentages of the death benefit to each person, organization, or fund. 

Whoever you name also cannot be overridden by your other estate’s affairs, such as a will or changes in power of attorney. In nearly all cases, these are separate monies that will be treated that way. 

You may want to consider additional death benefit protections for children and defendants that cannot care for themselves. Keep reading to learn more about trust advisors and child beneficiaries. 

Children as Beneficiaries 

It is not uncommon for children to be listed as beneficiaries of the death benefits of your life insurance policy. So, let’s make sure your kids are set up the right way. 

Children under the age of majority, most commonly 18, may not be legally allowed to claim your death benefit in your state. This is not always the case, and you should ask your life insurance provider what the rules are in your area.

One way to ensure your money is going toward helping your child after you die is to appoint a legal guardian to oversee your life insurance payout until your child is old enough. A legal guardian may receive the payouts on behalf of your minor or minors in order to cover immediate expenses. 

Another way to leave money to your child is to make a trust the beneficiary of your life insurance policy. The trustee, then, will oversee the funds based on your instructions. 

If funds are not immediately needed after death, your estate may be listed as a beneficiary (for your child to inherit when they are old enough).

If your life insurance policy is part of a large inheritance, the death benefit may be taxed as part of your estate. You may want to consider the possible bureaucratic backlog before naming your estate as your life insurance beneficiary. 

Can I change my beneficiary?

Your beneficiaries have designations that act as a safety net for your life insurance investment. The life insurance policyholder may designate someone either an irrevocable or a revocable beneficiary. 

An irrevocable life insurance beneficiary cannot be changed or removed from the policy unless that person waives their right to the death benefit. The life insurance policyholder can change a revocable beneficiary at any time. 

Some common situations that may prompt you to review and change your life insurance beneficiary: 

  • Getting married and adding your spouse to your policy 
  • Getting divorced and removing your spouse from your policy 
  • Having children 
  • Your primary beneficiary dies or no longer is financially dependent on you 

Life changes, so the people you need to protect after you die may also change.  

Life Insurance Beneficiary Rules: The Bottom Line 

The life insurance beneficiary rules are very flexible. If your family has a lot of debt, and you want to leave the funds to your children to pay that off, you can set up a trust with the funds from your life insurance or leave the funds to your favorite charity. 

There are not many limitations, as we learned. 

Do you still need life insurance? Use our free tool to find affordable life insurance rates in your area to help you plan for your family’s future. Enter your ZIP code to get started.