Mistake 1: Not Naming a Beneficiary
If you don't name a beneficiary, your life insurance proceeds go through probate — a lengthy and expensive legal process. This can delay payment to your family by months or even years and may reduce the amount they receive due to legal fees.
Mistake 2: Not Updating After Life Changes
Marriage, divorce, birth of a child, or death of a beneficiary all warrant an update. Failing to update your beneficiary designation after a divorce could result in your ex-spouse receiving the death benefit instead of your current family.
Mistake 3: Naming Minor Children Directly
Insurance companies cannot pay benefits directly to minors. If you name a child under 18 as beneficiary, a court must appoint a guardian to manage the funds — adding delay and expense. Instead, set up a trust and name the trust as beneficiary.
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Get Your Free QuoteMistake 4: Being Too Vague
Naming 'my children' or 'my spouse' without specific names and Social Security numbers can lead to disputes. Always use full legal names and update designations when names change.
Mistake 5: Forgetting Contingent Beneficiaries
Always name at least one contingent (secondary) beneficiary in case your primary beneficiary predeceases you. Without a contingent beneficiary, the proceeds revert to your estate and face probate.