Choosing your life insurance plan’s beneficiary is just as important a choice as your choice of plan type. Depending on your life situation and the policy you decide to go with, your beneficiary can be your children, spouse, or even a charity. But as with most everything else in life, your plan needs to be reviewed and changed, especially when it comes to your insurance plan’s payee.
Reviewing your beneficiary is a crucial step to ensuring that you’re fully maximizing your plan’s worth. A beneficiary that you may have designated in the past may or may not still be the right choice today. This is something you need to keep on top of in order avoid unintended consequences and issues when your assets need to be passed on.
This week, we’re looking at when and why it is so crucial to update your beneficiary information. By looking closely at some good examples that necessitate a beneficiary change, you will have a better idea of what to look out for in your life.
Change in Marital Status
Divorce is one of the most common reasons behind a change in beneficiary today. In this situation, either you or the chosen beneficiary could be going through a divorce, both of which can have a negative effect on the benefit’s distribution.
If you and your spouse are going through a divorce you need to be ready to shift your benefit away from your husband or wife. During such a chaotic time, people have actually forgotten to review their policies and have left their ex-spouse on the plan unintentionally.
On the other hand, if your beneficiary is going through a divorce you also may want to make some changes. For example, if your beneficiary was your adult son or daughter and they have decided to separate from their spouse, you can make your grandchildren the new beneficiary of the plan. Another situation is if your child decides to remarry to a spouse you completely do not get along with. Here you can change your beneficiary to avoid having your benefit payout to a disagreeable son or daughter-in-law.
The Death of a Beneficiary
This unfortunate event is another common instance of beneficiary review. If your beneficiary is your spouse or children, their passing can create complications for your plan’s payout. It is going to be the last thing on your mind during such a terrible time, but you will need to review your plan and make changes soon after.
Birth or Adoption of Children and Grandchildren
The more positive experience of gaining a new family member is yet another instance that calls for policy reviewal. What is important to check here is the wording of how you named your beneficiary. Make sure you have each child or grandchild named on the policy to avoid unintentionally disinheriting someone. Before the child arrives, go over your plan and make sure that the correct people are named under your beneficiary. If it doesn’t simply state “all children” or “all grandchildren” then either add in the new addition or change the wording to include all of your kids and/or grandkids.
Change in Name or Address
The change in name that comes for women during marriage or divorce can create problems for the passing on of your assets. Failing to update the paperwork to include your beneficiary’s new or returning name can make it extremely difficult for them to collect what you have left behind.
If you don’t make the necessary changes in time, your beneficiary will have to cover a number of legal costs, such as getting and retaining legal counsel, in order to obtain your benefit. These costs can end up chipping away at the final amount of the benefit and leave them with less to collect.
Keeping in mind that a person can change his or her address every few years, you need to ensure that your policy’s information is updated to match the change. Forgetting to review and update your policy in this instance can make locating your beneficiary unnecessarily difficult. If your chosen payee is living in a different country or province, then the process is even more complicated should you forget to update the information.
How Often Should You Check Your Plans?
As with other financial responsibilities, it’s so vital that you review all the information about your coverage on a regular basis. Typically, we recommend that people review their plans once or twice a year and not just wait for the instances above to occur to update policy information. If you find yourself unsure about any policy changes that need to be made, you should meet up with a trusted advisor to get a better understanding.
At Canada Life Insurance, we pride ourselves on our customer service. If you need help with any part of the updating process our experienced brokers will be able to assist you. Whatever your life situation is we can provide you with the proper and professional advising you and your family deserves.