Life Insurance Glossary: Terms To Know

The beneficiary of a life insurance policy is the individual, or individuals who will receive the death benefit of the policy in the event of your death.

There can be more than one beneficiary. Beneficiaries who will split the proceeds are called "joint beneficiaries." Beneficiaries can also be:

• Primary beneficiaries or contingent
• Revocable or Irrevocable
• A minor

You can generally leave different amounts of money to different beneficiaries. If you list several beneficiaries to a policy, but do not state the amount each gets, the usual presumption is that they share equally. It is better to state who gets what percentage -- as well as what happens if one of the beneficiaries dies before you.

Make sure that the named beneficiary on each of your life insurance policies is who you actually would like to receive the proceeds of the policy in the event of your death today. Remember, we can all get hit by a bus crossing the street.

If you don't name a beneficiary, some policies will pay the proceeds according to a specified order. For example, the policy may pay benefits first to a spouse first, then children, parents, etc. Otherwise, if the proceeds are claimed at all, they may be paid to your estate, and then distributed according to the provisions of your Will. If you do not have a Will, they will be distributed according to the rules of probate in your state.

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