To answer the question, there’s generally no limit to the amount of beneficiaries you can have on a burial insurance policy. There are some important caveats: 1) each plan is different, so you need to read the terms of your specific plan carefully, and 2) it may not be wise for you to have many beneficiaries. We explain below why you may want to be prudent with the number of beneficiaries you name in your policy.
How Naming Beneficiaries Works
When you apply for a burial insurance policy, you’ll need to put down the names of your beneficiaries. Specifically, you will need the names of your first beneficiary and a second beneficiary, the contingent, if anything should happen to the first. Some plans will require that you name at least one recipient while other policies will require at least 2, not including the contingent beneficiary. The beneficiary or beneficiaries will then receive the death benefit—the policy amount—on the event of your passing.
Why You May Want to Limit the Beneficiaries
While most policies will not limit how many beneficiaries you can name, it often doesn’t make sense to name too many heirs. This is because your beneficiaries will be required to split the money between them. Burial policy death benefits are generally modest, ranging from $2,000 to $50,000. Dividing even the highest amount – $50,000 – among many people reduces that amount of financial stability your policy will provide those people.
For example, if your death benefit is $25,000 and you name 2 beneficiaries, each beneficiary will get $12,500. However, if you name 5 beneficiaries, each one will get $5,000. While $5,000 is still a generous amount, it may not be as effective as the original $25,000 or $12,500.
Additionally, burial insurance was originally meant to help families cover expenses associated with the policyholder’s end of life. This includes things like funerals, medical bills, mortgages, etc. If you split your death benefit among many different beneficiaries, they may not all agree and may not spend it on what would be most beneficial for your family members that need it the most.
Burial insurance policies are very flexible. While each policy is different, most allow you to name multiple beneficiaries. It may not make sense for you to nominate many beneficiaries as it will split your death benefit and make each fraction smaller and smaller. For more answers to your questions about burial insurance, contact us at Senior Life Services today!