By Jennifer Gassaway
If your group clients’ employees are like most people, after signing up for life insurance coverage, they filed the paperwork and never gave it a second thought.
Checking or updating their insurance beneficiary designations is probably not top of mind in employees’ daily lives. Yet keeping information about their intended beneficiaries up to date is essential to make sure employees’ families are financially prepared for unforeseen circumstances.
As part of your fall enrollment meetings, you can provide a valuable service by encouraging clients to remind their employees to review and update their life insurance beneficiaries. This not only ensures that employees’ wishes will be carried out, but it helps facilitate timely payout of death benefits.
Life-changing life insurance events
Major life milestones often trigger a need to evaluate life insurance coverage and make beneficiary changes to align with new family situations. These life-changing events may include:
• Marriage. Getting married is an important reason for a life insurance checkup. In addition to updating the beneficiary designation to include the new husband or wife, there may be a need for overall coverage updates. Have clients remind newly-married employees to inform their new spouse about where to find coverage certificates.
• Divorce. For the same reasons, divorce usually triggers a beneficiary review and update.
• Birth or adoption. New parents will want to ensure their families are protected if they aren’t there to provide for them. However, parents should understand the pitfalls of simply naming their minor child as a primary or contingent beneficiary. If not done correctly, beneficiary payments for children who are minors may be difficult for the child to access until they are adults. A legal advisor can help ensure your employees’ wishes are carried out as they desire.
Best practices for beneficiary designations
Encourage clients to follow these best practices to help keep beneficiary designations up to date and prevent issues that could slow the payout process.
• Check beneficiary designations annually — or, at minimum, every other year.
• If the beneficiary designation is split between two or more people, the employee will need to allocate a percentage to each beneficiary. The assigned percentages must add up to 100 percent. This applies to both primary and contingent beneficiaries.
• When they receive a beneficiary form, employers must make sure the employee has signed and dated it. Incomplete or inaccurate paperwork could invalidate the revised designation.
• Remind clients to retain and file copies of the original designation at enrollment, as well as copies of all subsequent changes.
Although life insurance beneficiary conversations sometimes can be difficult, helping your clients maintain proper designations is an important service that delivers added value along with your life insurance sales.
Jennifer Gassaway is a marketing product manager with Standard Insurance Co. (The Standard). In her role, she is responsible for product planning and marketing for The Standard’s group life insurance product. Jennifer may be contacted at [email protected].
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