OLPolicy | (866) 757-5350 | olpolicy.com
Everything You Need to Know to Protect Your Loved Ones
When someone passes away, the last thing their family should have to worry about is money. That’s exactly why final expense insurance exists – to cover end-of-life costs like funeral arrangements, burial, and outstanding bills. But one of the most important parts of this policy is something many people overlook: choosing the right beneficiary.
In this guide, we’ll walk you through everything you need to know about final expense insurance beneficiaries – in plain, simple language. No confusing insurance jargon. Just clear, honest information to help you make the best decision for your family.
A beneficiary is the person (or people) you choose to receive the death benefit from your final expense insurance policy when you pass away. Think of it as telling your insurance company: “When I’m gone, send the money to this person.”
The money can be used for anything – funeral costs, cremation, medical bills or even everyday household expenses your family needs to stay on their feet. You’re in control of who receives it and how much they get.
There are a few different types of beneficiaries in final expense insurance. Here’s a simple breakdown:
This is your first choice – the person who receives the full payout when you pass. Most people name a spouse, adult child or close family member as their primary beneficiary. If the primary beneficiary is alive and reachable at the time of your passing, they receive 100% of the benefit.
A contingent beneficiary is your backup plan. If your primary beneficiary passes away before you or cannot be found, the death benefit goes to your contingent beneficiary instead. Always name one – it’s a simple step that prevents a lot of legal headaches later.
You can split the benefit between more than one person. For example, you might leave 50% to your daughter and 50% to your son. Just make sure the percentages add up to 100%. This option works great when you want to be fair to multiple family members.
Some people choose to name their estate as the beneficiary. While this is allowed, it’s generally not recommended. When the money goes to your estate, it may be subject to probate – a slow legal process that delays your family from receiving the funds. Naming a real person is almost always faster and simpler.
You have a lot of flexibility here. Most final expense insurance policies allow you to name:
Important tip: If you want to name a minor child (under 18), be careful. Insurance companies typically cannot pay death benefits directly to a minor. You may need to set up a trust or name a trusted adult to manage the funds on the child’s behalf.
Choosing a beneficiary isn’t just about picking a name – it’s about making sure the right person actually uses the money for its intended purpose. Here are a few practical things to think about:
Choose someone you trust completely. This person will be responsible for handling your final expenses. Pick someone organized, responsible, and financially reliable.
Think about who will actually handle your funeral. Often, this is the person closest to you – a spouse, an adult child or the person who will be making the arrangements.
Consider their financial situation. If your beneficiary has serious debt problems, the money could potentially be claimed by their creditors. A trust may be a better option in these situations.
Make sure they know they’re named. Always tell your beneficiary about the policy. If they don’t know about it, they may never claim it.
Life changes – and your beneficiary choices should keep up. Here are common life events that should prompt you to review your beneficiary designation:
Updating your beneficiary is usually simple. Contact your insurance company, ask for a beneficiary change form, fill it out, and submit it. Some companies let you do this online. There’s typically no fee for updating your beneficiary.
One golden rule: Never assume your beneficiary is automatically updated after a life event like a divorce. You must formally request the change with your insurance company.
When you pass, your beneficiary will need to file a claim with the insurance company to receive the death benefit. The process is usually straightforward and involves just a few steps:
Once the claim is approved, most insurance companies pay out within 7–30 days. Final expense policies are designed to pay quickly because funeral costs can’t wait. This is one of the biggest advantages of this type of insurance.
Even small mistakes with your beneficiary designation can cause big problems. Here are the most common ones to avoid:
❌ Not naming a beneficiary at all
If you don’t name anyone, the money goes to your estate and gets stuck in probate – which is slow, public, and costly.
❌ Naming a minor child directly
As mentioned, minors cannot legally receive insurance payouts. A legal guardian or trust must manage the funds.
❌ Forgetting to name a contingent beneficiary
If your primary beneficiary dies before you and there’s no backup, the payout goes to your estate.
❌ Using vague language
Saying “my children” without naming them specifically can cause confusion and disputes. Always use full legal names.
❌ Never reviewing your beneficiary
The person you named 15 years ago may no longer be the right choice today.
Q: Can I change my beneficiary at any time?
A: Yes, in most cases you can change your beneficiary at any time by contacting your insurance company. Simply fill out a beneficiary change form and submit it.
Q: What if my beneficiary dies before me?
A: If your primary beneficiary passes before you, the death benefit goes to your contingent beneficiary. If there’s no contingent beneficiary, it goes to your estate.
Q: Can I name more than one beneficiary?
A: Yes, you can split the benefit among multiple people. Just assign each person a percentage, and make sure all percentages total 100%.
Q: Does the beneficiary have to use the money for funeral expenses?
A: No, there are no restrictions on how the money is used. It’s a cash benefit, and your beneficiary can use it however they need.
Q: Is the death benefit taxable for my beneficiary?
A: Generally, life insurance death benefits are not subject to federal income tax. However, your beneficiary should consult a tax professional for their specific situation.
Q: What happens if I don’t name a beneficiary?
A: The payout goes to your estate, which then goes through probate court – a process that can delay funds for months and reduce what your family receives.
Q: Can I name a friend instead of a family member?
A: Absolutely. You can name anyone you trust – a friend, neighbor or caregiver – as your beneficiary. There’s no requirement that it be a family member.
Q: How does my beneficiary file a claim?
A: They contact the insurance company, submit a death certificate and claim form, and provide proof of identity. Most claims are paid within 7–30 days.
Choosing a beneficiary for your final expense insurance policy is one of the most loving things you can do for your family. It means they won’t have to scramble for money during one of the hardest moments of their lives. It means your wishes are honored, your bills are paid, and your loved ones can focus on grieving – not finances.
Take the time to choose wisely, review your decision regularly, and make sure the person you name actually knows about your policy. These small steps make a world of difference.
If you have questions about final expense insurance or need help finding the right plan for your family, OLPolicy is here to help. Call us today at (866) 757-5350 – we’ll make the process simple and stress-free.
OLPolicy | (866) 757-5350 | olpolicy.com
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