Beneficiaries: don't screw this up.
The single most common life insurance mistake is not the policy you bought. It's who you named on it, or forgot to update.
The two categories.
A primary beneficiary is who gets the money if you die. A contingent beneficiary is who gets the money if the primary is also dead, missing, or refuses the payout. You should always name both.
You can name multiple people in either category and split the payout by percentages. 50/50, 60/40, 33/33/34 — it just has to add up to 100.
Per stirpes vs per capita.
This is the phrase almost no one explains at signup. If you name your three kids as equal beneficiaries and one of them dies before you do, what happens to their share?
'Per capita' means the surviving beneficiaries split it — the other two kids get 50/50, and your late child's kids (your grandchildren) get nothing. 'Per stirpes' means the deceased child's share passes down the branch — your grandchildren from that child split what would have been their parent's third.
For most parents, per stirpes is what you actually want. It's a free election on the form. Check it.
“'Per stirpes' is a single Latin phrase that keeps your grandchildren from being disinherited by accident.”
Never name a minor directly.
If you list your 8-year-old as a beneficiary and die tomorrow, the insurance company cannot legally hand a check to a child. The money goes into a court-supervised guardianship, gets slowly drained by legal fees, and is released to your kid at 18 in one lump sum, with no strings attached.
Instead: name a trust, or an adult custodian under your state's UTMA/UGMA laws, or set up a revocable living trust as the beneficiary and let your successor trustee manage the money on the kid's behalf. A one-hour visit to an estate attorney fixes this permanently.
The updates people forget.
Update your beneficiaries after any of these:
- →You get married. Your policy still lists your college girlfriend. Really.
- →You get divorced. In most states the policy will pay your ex unless you change it, regardless of what the divorce decree says.
- →You have another kid. Add them, and re-check per stirpes.
- →A beneficiary dies. Move the contingent up and add a new contingent.
- →You move to a community property state. Some states require spousal consent to name a non-spouse.
How to actually check yours.
Log into every insurance account you have — employer group life, private policies, retirement accounts, HSAs — and screenshot the beneficiary designations. Put it on your calendar to do this once a year, on your birthday. It takes twenty minutes and it is the highest-leverage estate planning you will ever do.
If you're not sure who's listed, call the insurer. They will tell you. There is no scenario where 'I'm not sure' is a better answer than knowing.