How to Make Sure Your Heirs Receive Your Life Insurance Benefits

9:17 pm Asset Protection, Estate Planning

life insurance How to Make Sure Your Heirs Receive Your Life Insurance BenefitsIf you have gone to the trouble and expense of maintaining a good life insurance policy, you want to make sure your heirs receive the benefits when the time comes.  However, there are several common mistakes that could severely impact those benefits, so be sure you’re not making any of these:

Lying on the application.  Life insurance companies set rates based on the information you give them.  If you have a major health issue and don’t mention that in your application, they could deny benefits to heirs.

Policy lapse.  If you fail to make timely payments on your policy, it may lapse and be of little or no benefit to your heirs.  Most providers give policyholders a 30- or even 60-day grace period, but if you let your policy lapse for nonpayment, there is nothing your heirs can do to reinstate it.

Not naming back-up beneficiaries.  You should always name back-up beneficiaries for your life insurance policy, just in case the primary beneficiary should die before you do.  You should also name a final beneficiary in case your primary and secondary beneficiaries predecease you.

Risky behavior or suicide.  If an insurance company investigates your death and finds it was due to risky behavior on your part, or you died by your own hand, this could nullify your policy.  Your beneficiaries may be entitled to the however much you paid in premiums, but nothing beyond that.

Neglecting to tell your family about the policy.  Failing to tell your heirs about the existence of  a life insurance policy doesn’t necessarily mean they won’t get any benefits, but it can make the process more lengthy.  Several states, including California, have sued insurance companies in the past for not paying out death benefits because they were not vigilant about doing database checks for policyholder deaths.  Don’t rely on the insurance company to make good on your policy automatically.  Tell your family about the policy and where they can find it after you are gone.

Avoid these and other mistakes by contacting our Orange County law firm for guidance on effective estate planning strategies.

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