Beneficiary

In a life insurance policy, the policy holder must name a beneficiary. The beneficiary is the person who receives the value of the policy when the policy holder dies.

The beneficiary is usually the spouse or significant other of the life insurance policy holder. If there is not spouse or significant other, the life insurance policy holder will usually name their children as their beneficiaries. The reason for choosing the spouse or children of the policy holder is to replace the income or services that the deceased provided for the family. In fact, those who do not have immediate families often choose to purchase only enough life insurance to cover funeral costs, as there will be no one left without income should the policy holder die.

It is important to clearly name the beneficiaries on your life insurance policy. This ensures that the person you intend to receive your benefits does in fact receive them.

More Glossary Terms Explained here