Who you name and how you name them can determine whether your family actually receives your life insurance payout. These are the mistakes IronHaven sees most often.
Mistake 1: Naming Your Estate as Beneficiary
When the death benefit goes to your estate, it becomes subject to probate - which is public, time-consuming, and reduces the payout by legal and court costs. Naming individuals directly bypasses probate entirely.
Mistake 2: Not Naming a Contingent Beneficiary
Your primary beneficiary is who receives the benefit if they're alive when you die. A contingent beneficiary receives it if the primary isn't available. Without a contingent, the benefit falls to your estate if something happens to your primary beneficiary first.
Mistake 3: Naming a Minor Child Directly
Children under 18 can't receive life insurance proceeds directly. The money gets held by a court-appointed custodian until they turn 18 - not always who or what you intended. A trust or custodian account named in the policy handles this more cleanly.
Mistake 4: Not Updating After Major Life Events
A policy you bought before a divorce that still names your ex-spouse will pay out to them - regardless of your current intentions or will. The beneficiary designation on a life insurance policy overrides your will.
Mistake 5: Not Updating After a Beneficiary Dies
If your beneficiary dies before you and you haven't updated the policy, the benefit can end up in your estate, going through probate - exactly what the beneficiary designation was designed to avoid. The NC Department of Insurance recommends North Carolina policyholders review beneficiary designations at least every three to five years. Review your life insurance policy or contact IronHaven in Wake Forest for a beneficiary check.
