Choosing the beneficiaries for your life insurance policy is one of the most important decisions you’ll make. Your beneficiaries determine who gets the death benefit payout if you pass away. Here are some key considerations:

– Primary vs. contingent – Primary beneficiaries receive payout first. Contingent are backups in case primaries pass away before you.

– Percentages – For multiple beneficiaries, assign percentages instead of dollar amounts. Percentages keep payouts proportional if the death benefit changes. 

– Updates – Review your beneficiaries regularly and update as needed if relationships or life situations change. Divorce, deaths, new children are common reasons to update.

For example, when Steve originally bought life insurance, he listed his wife Susan as sole primary beneficiary. When they divorced, he never updated his policy. Tragically, Steve died shortly after. The entire benefit had to be paid to Susan since she was still listed as the primary, not Steve’s new girlfriend.

Carefully choosing and updating your policy beneficiaries can prevent these kinds of situations. Be sure you fully understand how payouts are distributed so your loved ones are protected.