What to tell your beneficiaries when you buy insurance for yourself?
Everyone buys insurance with a purpose and that is to protect the individual (the policy owner) and their loved ones should anything happen to them. Parents normally buy insurance for their children when they are very young (like they were 2-3 year old only) because parents want them to be able to live normal lives even if the parents are not around to take care of them anymore.
But most of the time, children are not aware of the policies bought for them many years ago. This a short guide on what to tell your beneficiary when you have bought insurance. If the children are too young, you can let your spouse or a trusted guardian/friend be aware of the policy bought.
What does the policy cover?
For example you bought a whole life insurance policy, you can let your spouse know in the event you die (husband/ wife) before age 65. There will be a lump sum payout. Another example can be if you bought a critical illness rider with your whole life policy, in the event you can get a critical illness (must be certified by a doctor) you can contact your financial adviser for claims.
It is better to inform your spouse about the tiny details covering the policy, such as at what stage (early/middle/late) of the critical illness can the payout be claimed. This is a precaution in the event the policy owner is in a coma or paralysed they will not be able to tell the distraught spouse whether there is insurance which covers the policy owner.
What is the purpose of policy
There are many different policies in the market, hence it would be beneficial to let the spouse be aware of the purpose of the policy. For example a husband bought a savings policy because he wants a lump sum for his child when she enters university 20 years later . So if he bought a savings policy in the year 2000, he can anticipate a payout at year 2020.
He can let his spouse be aware that the savings policy will be used for their children's education in the future.
Who to contact if something happens to you (policy owner)
Some policy owners don’t inform anyone who their financial adviser is, and when something happens. Their family members wouldn’t know who to call to check if the individual is covered by insurance. It’s best to let the spouse or trusted guardian/friend be aware of the financial adviser’s contact information, such as the email address or mobile number and the company name of the financial adviser.
Where did you keep the policy document
Some insurance companies still require the policy document to be presented when the claims are being made, therefore it will be better inform your family members where the document is kept.
I hope this guide was helpful to know on what to tell your beneficiaries in the future or in the present.