Life Insurance for Distribution Franchise Owners

 

What is the coverage benefit for Life & Accidental Death & Dismemberment?

  • $50,000 for Life and $50,000 for Accidental, Death and Dismemberment

What is covered under Accidental Death & Dismemberment $50,000 benefit?

  • 100% of benefit for loss of Life; Both Hands or Both Feet or Sight in Both Eyes; One Hand and Foot; One Hand or One Foot and Sight of One Eye Speech and Hearing in Both Ears; Quadriplegia

  • 75% of benefit for Paraplegia

  • 50% of benefit for loss of One Hand or One Foot or Sight of One Eye; Speech or Hearing in Both Ears; Hemiplegia

  • 25% of benefit for loss of Thumb & Index Finger of Same Hand

If I were to loss my life due to an accidental death such as automobile accident, how much benefit will be paid to my beneficiary?

  • Your beneficiary would be eligible for a total of $100,000, which includes Life benefit of $50,000 and another $50,000 under Accidental Death.

How do you designate a life insurance beneficiary legally?

There are two basic types of life insurance beneficiaries:

  1. Primary beneficiary: The primary beneficiary is the person (or persons) who will receive the proceeds of the life insurance policy when the insured person dies. However, the primary beneficiary will not receive any proceeds if he or she dies before the death of the named insured.

  2. Contingent beneficiary: This is also known as the secondary beneficiary. The contingent beneficiary will not receive any of the life insurance proceeds if the primary beneficiary is still alive when the insured person dies. The contingent beneficiary is only entitled to receive proceeds if the primary beneficiary dies before the named insured.

The safest approach is to name a primary beneficiary and a contingent beneficiary on a life insurance policy.

How do you choose who should be your life insurance beneficiary?

You should consider:

  • Family: One or more immediate family members who are dependent on you for both your income and financial support should top your list of potential beneficiaries. Your primary and contingent family beneficiaries can include your spouse or domestic partner, children, brothers and sisters, parents, or any other member of your family. It is up to you decide on the order of importance.

  • Legal guardian: If your named beneficiaries are minors (under the age of legal consent), the life insurance company may require that you name a legal guardian as the beneficiary. Alternatively, you can designate a legal guardian using the Uniform Transfers of Minors Act on their behalf instead of using a legal guardian. Note that even if you have named a guardian as beneficiary, the proceeds will not be paid until the court has specifically appointed a guardian or approved the named beneficiary as guardian for the minor(s).

  • Estate: You can choose your estate as beneficiary. The proceeds will go to the Executor or Administrator of the estate. This is the person or entity designated in the insured’s last will and testament, and who must be approved or designated by the probate court. However, you can only use your estate as the named beneficiary if you have drawn up a last will and testament, and must not name a specific person on the beneficiary designation of your policy. Be sure to discuss the tax implications of naming your estate as beneficiary with your accountant, financial advisor or insurance agent.

  • Trusts: A trust must be set up before you can designate one or more trustee and name the trust beneficiaries.

  • Charity: You can name a charity as either the primary or contingent beneficiary.

  • Key person life insurance: It is a common practice for a business to purchase life insurance on key personnel in the company. This form of life insurance may be owned by the company, in which case the business is typically the beneficiary of any applicable life insurance beneficiary policies. Or the business owner may buy a life insurance policy and name a co-owner as beneficiary, enabling the co-owner to purchase the policyholder's share of the business if the policyholder dies.

What If You Want to Name Multiple Beneficiaries?

If you want to name more than one life insurance beneficiary, there are two approaches you can take:

  • Per stirpes: You can designate your beneficiaries by “branches of the family or lineage.” This means that the life insurance proceeds would be passed down to be divided equally among the beneficiaries and/or the surviving children of the beneficiaries.

Example: You, as the insured, designated your son (John) and daughter (Jane) as beneficiaries. Your son John dies before you do. If you were to pass away next, then Jane would receive 50 percent of the proceeds and the remaining 50 percent would then be apportioned equally to all of John’s surviving children.

  • Per capita: Simply put, the proceeds are divided equally among all the beneficiary survivors of the lineage line.

Example: Using the above scenario, suppose John had four children and Jane had no children when you, as the insured, passed away. This means that the proceeds would be divided equally between John’s four children and Jane. Since there are a total of five beneficiary survivors, each beneficiary would get one-fifth of the life insurance proceeds.

  • If you have multiple beneficiaries, it is best to designate that proceeds will be distributed as a percentage rather than a dollar amount.

What should I do if my beneficiary dies before me?

  • If your beneficiary dies before you do, you must rename the beneficiary on the policy as soon as possible. How do you do this? All you have to do is contact the life insurance company and request a “change of beneficiary” form.
  • If both the insured and beneficiary die at the same time, then the proceeds would go to the insured’s estate.

Can I change my beneficiary elections at any time?

  • Yes. It is important to keep your beneficiary information current on all your life insurance policies.
  • Please contact JLP & Associates at 844-573-8089 for the form.

What are some of the “Dos and Don’ts” of naming a beneficiary?

Here are some things you should do and some things you must avoid when naming a beneficiary:

  • DO identify the primary beneficiary. This should include their full name(s), date of birth, address and social security numbers.

  • DO designate percentages rather than specific dollar amounts.

  • DO include a secondary or contingent beneficiary in your policy.

  • DO re-visit your life insurance policies every few years to ensure the beneficiary designations are current.

  • DO amend your life insurance policy if your circumstances change, for example in the event of a new addition to the family, the death of a beneficiary or divorce.

  • DON’T use “estate” as beneficiary when you have specific family members that you want to receive the proceeds. If you name your estate as beneficiary, the proceeds will be become entangled in the estate probate and could cause potential tax issues. Your creditors will also be able to place their claims against the estate proceeds. Named beneficiaries get the proceeds of a life insurance death benefit directly.

  • DON’T name minors unless you have a designated guardian for the children.

  • DON’T name a creditor as a beneficiary.

Naming a beneficiary requires some thought. If you don't put some thought into how you name your beneficiaries, your family and estate may face legal or tax complications. Always keep your beneficiary information current on all your life insurance policies.

 

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