The decision to purchase life insurance is often prompted by a desire to ensure the financial stability of your family after you die. Life insurance proceeds can be used to help pay a mortgage, provide living expenses and even pay for higher education. The amount of a life insurance payout varies based on the type of life insurance policy you purchase and the policy's value. Policies are available that cover specific periods of time as well as your whole life.
Step 1
Read and understand your life insurance policy. Most policies have minimum requirements and stipulations for payout. It is critical that you follow all requirements to ensure your family can receive the funds from your life insurance policy. If you have questions about policy requirements, obtain clarification from the company who issued or manages your policy.
Step 2
Establish primary and contingent beneficiaries for your life insurance policy. Assign primary beneficiary status to your adult family members who are your first choice recipients of the payout funds. List your backup recipients as contingent beneficiaries to insure you control your payout preferences.
Step 3
Set up a trust for minor recipients and assign a trustee. Minors are often barred from receiving life insurance proceeds until a legally specified age. Establishing a trust can prevent restrictions on distributions. Assign a trustworthy adult trustee who will distribute funds according to your wishes and the best interest of your children or minor recipients. List the trust as the beneficiary on your life insurance policy.
Step 4
Discuss your policy with your family. Provide the policy number, contact information and filing location of the original policy to any potential beneficiaries of your policy. If you store your policy in a safe, be sure your beneficiaries have the key or code for entry.
Step 5
Update your beneficiaries based on life changes. If you remarry or your children become of age to receive life insurance proceeds, change the beneficiaries on your policy according to your payout preferences. Discuss these decisions with your financial adviser or lawyer and sign the changes in front of multiple witnesses to prevent challenges or disputes among potential beneficiaries after your death.
Step 6
Pay all premiums on time. Late payments can invalidate a life insurance policy, so ensure payments in full are made according to the policy's requirements.
Tips and Warnings
- Establish an automatic payment schedule to prevent missing a payment due to illness or a lost billing statement.
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