Choosing a beneficiary might be the most important decision you make when setting up your life insurance policy. Get it right, and your family receives exactly what you intended. Get it wrong — or forget to update it — and the consequences can be significant.
What is a Beneficiary?
A beneficiary is the person or entity you designate to receive your life insurance death benefit when you pass away. You can name virtually anyone as a beneficiary — a spouse, child, parent, sibling, friend, business partner, trust, or even a charity.
Most policies allow you to name multiple beneficiaries and specify what percentage of the death benefit each person receives. For example, you might leave 60% to your spouse and 40% split equally between your two children.
Primary vs. Contingent Beneficiaries
There are two types of beneficiaries you should be aware of:
- Primary Beneficiary — the first person(s) in line to receive the death benefit. If they are alive and able to receive it, they get it.
- Contingent Beneficiary — the backup. If your primary beneficiary passes away before you or is unable to receive the benefit, it goes to your contingent beneficiary instead.
Always name both. Failing to name a contingent beneficiary means the death benefit could go through probate if your primary beneficiary predeceases you — a process that can take months and reduce what your family ultimately receives.
💡 Always name a contingent beneficiary. It takes 30 seconds and can save your family months of legal headaches.
Can You Name a Minor as a Beneficiary?
Technically yes, but it's complicated. Insurance companies cannot pay death benefits directly to minors. If you name a child under 18 as your beneficiary, a court will need to appoint a guardian to manage the funds until the child reaches adulthood — a process that can take time and money.
A better approach is to name your estate and set up a trust, or name a trusted adult as custodian for the minor. Talk to an Eterna agent about the best way to structure this for your situation.
The Most Common Beneficiary Mistakes
- Forgetting to update after major life events — divorce, remarriage, having children, or a beneficiary's death can all make your existing designation outdated or even harmful
- Naming your estate as beneficiary — this sends the death benefit through probate, which can delay payment and reduce the amount your family receives
- Not naming a contingent beneficiary — leaves no backup if your primary beneficiary passes away first
- Naming a minor directly — creates legal complications around who manages the funds
- Not telling your beneficiaries — they need to know the policy exists and where to find it
When Should You Update Your Beneficiaries?
Review and update your beneficiaries whenever you experience a major life change:
- Getting married or divorced
- Having or adopting a child
- Death of a named beneficiary
- Significant change in your relationship with a named beneficiary
- Starting or dissolving a business partnership
Updating your beneficiaries is free and takes just a few minutes. Contact your carrier or your Eterna agent to make changes at any time.
Need help reviewing your existing policy or setting up beneficiaries correctly? Book a free consultation with a licensed Eterna agent — we'll make sure everything is set up exactly the way you intend.
Make Sure Your Policy Is Set Up Right.
A free policy review takes 30 minutes and gives you complete peace of mind.