So you've got life insurance now, well done! The big step is over - the next step is to pick your beneficiaries.
But what are beneficiaries? How do you pick them? And why it's important to discuss it with them? We're here to answer all of your pressing questions.
What is a beneficiary?
A beneficiary, like the name suggests, is the person who you want to benefit from your insurance. In other words, the beneficiary is the person you want to receive the money (which is called the 'death benefit' - we know, cheerful) at the end of the claim.
You can name one person, multiple people (up to 10), the trustee of a trust you've set up, or a registered charity. If you don't name anyone, the death benefit will usually be paid as directed by your estate, which may not be as tax efficient - that's why it's important to have a think and make sure you pick beneficiaries as soon as you can.
That's the simple explanation. But we promised to tell you everything about beneficiaries, and that's what we're going to do! The detailed explanation is that most yulife policies (not including group and individual policies) are written into a master trust. What that means is that, for tax and other reasons, we appoint a trustee that will receive the money and distribute it once the claim is finalised.
Through our beneficiaries page, you have the opportunity to tell the trustee who you'd want the payout to be distributed to, and how. Unless there's a good reason not to, the trustee will follow your expression of wishes.
If you have yulife group, your employer will have set up their own trust and should have contacted you to choose your beneficiaries. If you want to change them, you'll need to talk to your employer.
How to choose a beneficiary?
In order to choose who your beneficiaries should be, it's helpful to first think about the purpose of life insurance. Life insurance is meant to help your loved ones who are dependent on your income when you're no longer there. That includes helping them with their everyday expenses, and to cover funeral costs and any outstanding financial liabilities, such as credit card debt and mortgages.
So in order to decide who you should pick as a beneficiary, ask yourself the question: 'who will be most financially affected by my death?'.
We know, it's a really difficult question that nobody wants to ask themselves. But think about it this way: by making a well-thought-out decision now, you'll save them a lot of confusion later!
Going back to the question, normally the answer would be pretty straightforward. Your partner, children, parents or siblings are common beneficiaries. If you can't decide, you can always pick more than one beneficiary, but always try to think about who would need the money the most.
If you've decided to name more than one beneficiary, it's always good to specifically name the amount each of them will get. Don't worry, you don't need to pull out your calculator - percentages will suffice.
This is a lot to take in, but once you've made your decision, naming your beneficiaries through the yulife app or website is super simple and hassle-free. If you require instructions, make sure to visit our FAQ page that deals with just that.
We just wanted to make a quick note here and mention that it's really good to try and go over your policy every year or so, just to make sure you don't need to update anything - including your beneficiaries. This can be due to happy reasons (getting married, having a new baby, or your child reaching 18) - but also in case of the death of a beneficiary or a divorce. In order to prevent confusion and extra money being spent in the future, you can set a yearly reminder on your phone to go over and update your details.
What do I need to tell my beneficiaries?
It's generally recommended to tell your loved ones that you've named them as beneficiaries in your life insurance policy. But what exactly should you tell them?
Of course, it's an uncomfortable subject - almost as uncomfortable as talking to them about money - but it can save them a lot of future hassle.
First of all, make sure they know the size of your policy, who's paying for it, and which company insures you. These are basic details that they should know in case of a claim.
But more importantly, you should think practically. Tell them where the forms are, where you're filing the instructions, and who they should contact in case they need to make a claim. Think of anything they might need and make sure they have all the information!
That's it! You have everything you need to start thinking about your beneficiaries. If you're interested to learn more about yulife, click here.