When it comes to setting up a trust, life insurance policy, or any form of financial safety net for the future, you will likely be asked to choose a beneficiary, but what does this mean? How will this impact the payout of your policy and who do you choose?
What is a beneficiary?
A beneficiary is someone you choose to receive the payout of a policy you have taken out. For example, if you have a MiWayLife life insurance policy or funeral cover, you will need to choose someone who will receive the payout amount when you die. In cases where there are more than one person you would like to choose to benefit from your policy or trust fund, you can choose to split it in a way you see fit. For example, you can choose to have a R5 million life cover payout split 50/50, 20/20/60, or 100% of the payout can go to one person.
Why is it important to choose a beneficiary?
Billions of rands remain unclaimed from trust funds and policies that have been set up by benefactors who have passed away due to not informing or listing anyone as a beneficiary. It can mean all your hard work towards building a financial safety net for those you love is flushed down the drain. You can always choose to have a legally recognised that will help inform your beneficiary(ies) about a policy to make it easier for them to place a claim when it is time.
4 Things to consider when choosing a beneficiary
Choosing a beneficiary can be overwhelming. You will also need their I.D numbers to add them to your policy to make it easier to track them down when it is time to place a claim. Here are a few things to consider when choosing a beneficiary:
Do they depend on you financially?
Anyone who depends on you financially can benefit as a beneficiary, especially if you are the main breadwinner. Having a financial safety net in the form of life insurance can give you peace of mind knowing that they will be taken care of no matter what happens to you. You can use our life insurance calculator to find out just how much life cover will be enough cover for you and your loved ones.
Do you have children who are minors?
No parent wants to ever think of a future where they will not be around to raise their children, but things can happen which are beyond our control. Listing your children as beneficiaries can protect their financial future. It can be used to pay for daily expenses, taking care of the education, or even helping them get started on life once they have graduated.
Are you planning on supporting any charities?
You can list a charity or organisation as a beneficiary to receive a life insurance payout, even in the case where you do not have any dependents.
No matter who you choose to list as a beneficiary, it is always crucial to review your documents regularly to keep them up to date with your wishes. Always remember that you can change beneficiaries to keep up to date with changes in your life.