What Is a Life Insurance Beneficiary?

What Is a Life Insurance Beneficiary?

by Leslie Freeland, July 13, 2016

Your pet? Your child? What about someone in prison?

Who actually qualifies?

Purchasing a life insurance or mortgage protection life insurance policy (mortgage protection insurance) can often be confusing and difficult to navigate, and you may have no idea where to start. The first step to a secure life insurance or mortgage protection insurance is to meet with your trusted insurance agent. During that meeting, you will be completing your insurance paperwork, and that includes choosing a beneficiary.

Your beneficiary is the person or people you want to leave your insurance money (death benefit) with after you die. Usually people just pick one person, like their spouse or adult child, but you can pick more than one if you want. You can even pick a beneficiary that is not a person!

Who CAN you name as your beneficiary?


Most people name one or more family members, such as a spouse, adult child, and even adult grandchildren. You can basically name any adult family member who depends on you for financial support.


Some people use life insurance to support charities. You do not need to take out a separate life insurance policy if you want to leave your money to both your family and a charity. One policy can do both!

Schools or Universities

Schools and universities often depend on financial support from life insurance proceeds. You can even use your life insurance money to set up a special scholarship fund, giving a little to new students each year to help them attend. Like the charity mentioned above, you don’t need a separate life insurance policy for this.

Non-relatives Who Depend on you Financially

Usually people select family members as their beneficiaries, but you can also list someone who is financially dependent on you (has insurable interest) who is not a relative. Imagine you and a close friend own a cupcake shop. If you died, would they financially suffer and possibly go out of business without your income? If so, you can name them as your beneficiary.


Often a trust is a good beneficiary choice because it helps you maintain maximum control over who gets your life insurance money.

Sometimes, unfortunately, some of your family members might start arguing over your insurance money, so naming your trust as your beneficiary will make sure your actual beneficiary gets the money and not someone else.

Also, you can make sure your minor children or disabled family members get your life insurance money and not someone else since they cannot be listed as beneficiaries.

With a trust, you may also avoid estate and other taxes.

Don’t have a trust set up yet? Don’t know what a trust is? Make sure you talk to a financial advisor regarding setting up a trust and making that trust the beneficiary of your life insurance.

Estates (your money will go here if you don’t choose a beneficiary)

Your estate is a list of everything you own, including your home, cash, cars and more. If you don’t choose a beneficiary, your insurance money (death benefit) will probably go to your estate. Make sure to contact a financial advisor about this since there may be tax consequences.

Who CAN’T (or shouldn’t) you name as your beneficiary?


Unfortunately, pets cannot be listed directly as the beneficiary of your life insurance policy. However, you can set up a trust for your pets to receive the some or all of your life insurance money with instructions that the money should go to your pet. A financial advisor will help you complete the proper paperwork and make sure you word everything correctly. If you do this, you certainly don’t need to leave everything to your pet. You can designate some of the money for your pet and divide the rest up as you like, for example – your children or grandchildren.

Petfinder.com has an extensive list of options you may consider to provide for your pets after you are gone. Often family and friends will offer to take in your pets. Make sure you talk about this with them in advance and even go over the pet’s detailed care requirements.

When someone talks about leaving money to a pet, often people only think of a dog or cat, but take a parrot for example. Parrots can live over 50 years. Or horses can often can live over 25 years. Some people even have tortoises as pets, and those have been known to live over 100 year! It’s not only dogs and cats who need to be cared for after their owner passes away.

If there is no one you feel you can trust to be a good pet parent for your furry/feathered/etc. friend, take the time to research rescue and care facilities as a backup, such as the Free Flight Exotic Bird Sanctuary or the 7 Springs Farm. You can use your life insurance money to pay for these services after you pass away. Check with your insurance agent for more details.


A minor is usually someone under 18 or 21 years old, depending on the state. There are two reasons why you shouldn’t designate a minor to receive your death benefit.

First, minors, in most states, aren’t old enough to accept benefits, so you’ll have to find another person to be the beneficiary (like a trusted family member or a trust) for them until they reach a suitable age.

Second, minors aren’t always the most responsible when given control of large sums of money all at once. Remember that trust we just talked about? You can set a trust to pay out the money when your young adult is a more suitable age and can be more responsible. This age just depends on the individual.

A trust is often the most recommended way to make sure a minor gets your life insurance money. If you decide to name a trusted adult instead, there could be complications. If that person were to go through a bankruptcy, divorce or more, the life insurance money could be lost.

There are other ways to make sure a minor gets your life insurance money in addition to a trust or a trusted guardian. Please check with your financial advisor for these details.

The Deceased or Imprisoned

The first one is self-explanatory. If you name a dead person as your beneficiary, it’ll be like you never even named one in the first place. Your agent should make this clear to you when you fill out your paperwork and help you choose a more suitable recipient.

The second one is a little more complicated. It is important for many families to make sure their relative is financially taken care of when they get out of prison. However, for a variety of reasons, the imprisoned beneficiary may not be able to receive your life insurance money. This is a sensitive and important topic – another topic to discuss with your financial advisor. Your financial advisor can show you all of your options to make sure your loved one gets the financial assistance they need. Again, a trust might help in this situation.

Legally Disabled People

Special trusts are needed in the case of a disabled beneficiary. The sudden proceeds from your life insurance payout may interfere with their government care and financial aid. Remember, trusts give you as much control over who gets your death benefit, so a trust might be the best solution here.

A good life insurance agent and financial advisor will advise you on the safest and best ways to make sure your disabled beneficiary gets the money you want them to have.


This one should be obvious. The reason you purchase life insurance is to protect those you love from financial hardship. A stranger does not depend on you financially (has no insurable interest). In fact, allowing a stranger to take out a life insurance policy on you could lead you to an ‘earlier-than-expected’ demise!

Friends Who Do Not Depend on you Financially

The purpose of life insurance or mortgage protection life insurance is provide for and financially protect those you love – those who depend on you. If you choose a friend who does not rely on your income for financial support, the insurance company may question your (and their!) motives when buying the life insurance or mortgage protection insurance policy. It may look like you are scamming the insurance company.

There are cases where listing your friend as your life insurance or mortgage protection insurance beneficiary does make sense though. One example is if you and your friend share a mortgage. Your friend may lose the home without your income (they have insurable interest), so they can be your life insurance or mortgage protection insurance beneficiary.

5 Important Tips

As you have noticed, choosing a life insurance or mortgage protection insurance beneficiary can be a complicated and serious business. Here are some additional tips to make sure that, no matter what, your money ends up in the right hands.

Tip#1: Be As Specific As Possible

  1. List the person’s or people’s names exactly as they are are legally. Do not use nicknames or a generic titles such as ‘spouse.’
  2. List the beneficiary’s date of birth.
  3. Provide social security information for the names you choose. It will make your beneficiary easier to find and reduce confusion.
  4. Leaving your life insurance or mortgage protection insurance money to more than one person? Make sure you are very clear about who gets what. List the percentage of your death benefits you want each person to receive.

Tip# 2: Name Future Children (even if you don’t plan to have any!)

Make sure that the phrasing of your life insurance policy includes children born after the time that you last updated your beneficiary. It’s a simple thing to push aside and think to yourself, “Oh, I’ll do that later” when a new child is born. But people have been known to leave children off by accident.

You should contact your insurance agent if you have any major life changes, such as the birth of a child, since your life insurance will need to be updated.

Tip #3: Tell Your Beneficiary!

This may seem self-explanatory, but make sure that when you name your beneficiary, they know! It’s best to let them know in advance so you can:

  1. Make sure they agree to be your beneficiary.
  2. Know to expect it when the time comes to receive your life insurance or mortgage protection insurance money.

It’s not a good idea to entrust someone with money and instructions without their knowledge, especially when they don’t feel prepared or responsible enough to handle it.

One of the service’s Asurea offers is a policy review and policy follow-up. As a courtesy, we call clients who have had their policy for a while and probably need to update it. Many of the calls are answered by surviving relatives since the original clients has passed away, and it is truly shocking how many people don’t realize their family member had a life insurance or mortgage protection insurance policy! So make sure to tell them.

Tip #4: Update Your Beneficiary

Did you know that your beneficiary can be changed at any time, not just when you first set it? It is imperative that you occasionally review your policy and make sure your beneficiary (and everything else) is current.

Did you: Have a new baby? Adopt? Remarry? Divorce?

Call your insurance agent right away if any of those apply to you. Your policy most likely will need to be updated.

Tip #5: Choose a Secondary Beneficiary

In addition to picking your main (primary) beneficiary or beneficiaries, you should have a backup beneficiary. This person is also called your ‘contingent beneficiary.’ This person would receive your life insurance or mortgage protection insurance money if your main beneficiary dies, can’t be found, become mentally impaired and more.

You can even choose a third beneficiary, called a ‘tertiary beneficiary.’ If your primary and secondary beneficiaries die or become incapacitated, your insurance money would go to your third beneficiary.

The second and third beneficiaries are just backup beneficiaries. They do not receive any of your insurance money if your primary beneficiary(s) are still alive.

Only want to pick a primary beneficiary? No problem! You don’t have to choose backup beneficiaries if you don’t want to. It’s highly recommended you do though. If you don’t want to pick a certain person, consider making a charity or school your secondary beneficiary.

2 Conclusions of This Article

Harder than you thought

First, choosing a life insurance or mortgage protection beneficiary isn’t as simple as it sounds.

Get Trusted Helpers

And second, having a trusted insurance agent and a trusted financial advisor is a good idea.




Asurea offers Life Insurance, Mortgage Protection Life Insurance, Medicare Supplement Insurance, Final Expense Insurance, Disability Insurance, Long-term Care Insurance, Retirement Planning products and more. For additional information, click on the ‘Learn more’ button below. Want to have articles just like this delivered to your inbox? Just enter your email address in the box below and click ‘Subscribe.’

This information is provided for general consumer educational purposes only and is not intended to provide legal, tax or investment advice. Dollar amounts are for illustrative purposes, not actual.


Leslie Freeland

Leslie Freeland

Find her at LinkedIn
Leslie joined Asurea as the Marketing Communications Coordinator in February 2015. Since then, she has been working closely with insurance professionals to educate the public on the importance of life insurance and protect the public from common scams with informational articles.
Leslie Freeland