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From the Learning Center

Does Your Spouse Have to Be Your Beneficiary?

By the Bestow Team·March 24, 2023·4 Minute Read

In this Article

Many people decide to purchase life insurance because they now have loved ones depending on them for financial support. Life insurance can provide a measure of financial protection if you were to pass away unexpectedly.

Choosing your beneficiaries is an important part of the process of setting up a life insurance policy. Here, we’re exploring what exactly a beneficiary is, who can be named, and whether your spouse has to be included as a beneficiary on your policy. 

What is a life insurance beneficiary?

A life insurance beneficiary is a person that an insured person names as a recipient of the payout of their life insurance policy if they were to pass away. With term life insurance, for example, the insured would select the amount of coverage and name their beneficiary (or beneficiaries).

While a life insurance provider or the state you live in may have requirements, the insured can generally name a spouse, child, other relative, a charity, their business, or their own estate. 

You must choose a primary beneficiary – the first person in line to receive the benefit – and you may also choose a secondary – or contingent – beneficiary who would receive the payout if the primary beneficiary declined the payout, or passed away. You can have multiple primary beneficiaries or name a single person as your primary beneficiary. 

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Choosing a life insurance beneficiary

Choosing a life insurance beneficiary is an important aspect of setting up your policy. Once a beneficiary receives the death benefit, they can do whatever they please with the money, so deciding who receives a payout – and how much – can take time and consideration.  

Does your spouse have to be your beneficiary? Typically the insured can choose the beneficiary of the policy. Community property states do have some specific laws concerning life insurance policies, so if you live in one of those such states, it would be best to consult a lawyer. 

Decide the purpose of the policy: Many people choose to purchase a life insurance policy when other people depend on them and would be affected financially if the insured were to pass away.

Helping to financially protect partners, children, and businesses are some such reasons people can take out life insurance policies. 

Consider your options: People generally have the following options when naming beneficiaries: 

  • One person (i.e., a spouse)
  • Two or more people (i.e., a spouse and children)
  • Your estate 
  • Your trust
  • A charity
  • A business partner 

If there are multiple primary beneficiaries, the insured must also decide what percentage goes to each beneficiary (i.e. 50 percent to your spouse, 20 percent to each child, 10 percent to a charity). The percentages have to equal 100 percent. 

Have a back-up: If your primary beneficiary is unreachable or has passed away, your death benefit would need a contingent beneficiary who would be able to then receive the benefit. Choosing a secondary/contingent beneficiary can be as important as choosing a primary beneficiary. 

Update your policy as needed: A lot can change over the term of a life insurance policy – marriages, divorces, births, etc. Make sure that your beneficiaries are still those you would want to receive a payout if you passed away and that the insurance company has updated contact info for them. 

Irrevocable and revocable beneficiaries: Once you’ve named an irrevocable life insurance beneficiary, you cannot change their designation without that beneficiary’s approval. These are rare, but can ensure that the death benefit reaches the person you want (i.e., naming a child as an irrevocable beneficiary may ensure they receive the benefit even after a divorce).

Revocable life insurance beneficiaries are flexible and can be changed, updated, added, or removed at any time. This allows you to update your designations as needed. 

What happens if you don’t have a beneficiary? 

If your named beneficiaries were deceased or unreachable, the insurance carrier would have its own rules about where the assets would go after your death. Generally, life insurance proceeds would be paid to your estate.

There may be some other order outlined in your insurer’s policy, so you would want to confirm those details with your specific carrier. Without a listed beneficiary, it can take much longer for the family to receive the proceeds, and they would likely be subject to estate taxes, where named beneficiaries generally receive the proceeds tax-free. 

If you want a portion of the benefit to go to your children, there are other items to keep in mind – naming a minor child as a beneficiary could subject them to limitations from the state or lengthy court processes where a legal guardian may have to be appointed.

A trust could be formed to leave a set amount of the benefit only to be accessed by your children when it is appropriate for them. 

While choosing who and how much each of your beneficiaries could receive seems like a complicated process, applying for term life insurance can actually be easy.

With Bestow, we want to make it easy to apply for term life insurance. If you’re looking to provide some financial protection in case of your loss for a partner, children, or all of the above, head over to get your instant free quote today.