When you insure yourself under a life insurance policy, you will name a beneficiary who will receive the policy’s payout in the event of your death. This settlement is called a death benefit, and it can ease your survivors’ financial burdens in numerous practical ways. 

You might decide that leaving life insurance to family beneficiaries is the best way to enable them to settle your estate. However, a death benefit is different from other types of inheritance. Here’s what you should consider when you are choosing the death benefit for your life insurance policy. 

How Do Death Benefits Work? 
You buy life insurance while you are still alive, but it is only designed to pay out in the event of your death. You can choose the sum of the death benefit included within the plan, and you can also choose for how long you want the policy to cover you. Some plans only cover you for a certain term of years (term life insurance) and others last for the rest of your life (permanent life insurance). 

At the time of choosing the plan, you will also name the beneficiary to who you want to receive the policy funds. You cannot be both the insured and the beneficiary on the policy since you must die for the policy to pay out benefits. Should you die while the policy is in place, your beneficiary will receive the death benefit. Some life insurance plans allow you to name primary and contingent beneficiaries, and you can also instruct that each beneficiary receive a certain percentage of the death benefit. 

One positive aspect of life insurance death benefits is that they are not considered part of your estate. As a result, they will not go through the probate process. Therefore, your beneficiaries won’t automatically be obligated to repay creditors or others using this money. 

Still, if you want to put stipulations on how the death benefit money is to be used, then you have the option of placing the money into a trust. The trust will be the technical beneficiary on the policy, and you can set rules within the trust on how the named trustee is to distribute the money within. 

You should let your beneficiaries know that you are naming them on your life insurance policy. That way, they will know that, upon your death, they need to notify the life insurer and start the claims process. At that time, they should receive the money within a few weeks. However, they will have to provide proof of your death, and the insurer might take longer to pay out benefits (or even deny a claim) if there are suspicious circumstances surrounding your passing. 

If you are unsure your loved one will know what to do with your life insurance death benefit, you can let your will or attorney provide instruction to your beneficiary after your death. Additionally, your life insurance agent can help your loved one through this process. 
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If you have life insurance, then you will name a beneficiary. The beneficiary is the person who will receive the death benefit payout upon your death. You want your life insurance to help your survivors move on financially. However, choosing the right beneficiary might feel like a big challenge, particularly if you are single.  

Still, if you are single and are in the process of getting life insurance, you have a lot of freedom to choose the beneficiary who you think will be most capable of settling your final expenses. Choosing a beneficiary for your policy is completely up to you. Still, you should put appropriate thought into naming the right recipient.  

Consider how the following individuals might benefit from your policy: 

• Your children. If you have children, then they may be the best options to name as beneficiaries. You can even structure your policy so that each child receives a certain percentage of the funds. If the children are still minors, you may wish for the funds to pay into a trust that is overseen by a named trustee, which can help to care for the children’s needs until they reach a certain age. 
• Other dependents. Are you taking care of an elderly parent? What about a disabled adult child? These individuals might benefit from being named your life insurance beneficiary. However, you might still need to put this money into a trust because this individual might not be able to make financial decisions for themselves. 
• A charity. You can leave the funds from a life insurance policy to a charity if that is what you like. The money can be donated to the charity at the time of your death, in your memory.
  
• Your estate. The funds can be funneled into your estate. This means the money is split to pay your creditors and then split with your heirs. This gives you the least amount of control over your life insurance money and if you fail to name a beneficiary on the policy, then the money will default to your estate anyway. 

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Plus, there are countless other people who you might decide to make beneficiaries on your policy—friends, siblings, business partners or extended relatives. In reality, the decision of who to name as a beneficiary is entirely up to you, and as a single individual, you have a lot of room for leverage. 

The choice of beneficiaries is an important part of life insurance decisions. And, it always helps to have more than one listed on the plan (in case the first person cannot accept the funds). Take a few minutes to discuss your needs with your loved ones so you can make the best decision going forward.