Life Insurance Beneficiaries Were Paid a Record $100 Billion in 2021. Here Are 3 Ways to Make the Most of Your Coverage

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Talk about a large number. 

Life insurance is the sort of thing most people buy and hope they never have to actually use. But last year, life insurance policies no doubt bailed a lot of people out financially.

The American Council of Life Insurers reports that U.S. life insurance companies paid a record $100 billion in benefits in 2021. That’s an increase of almost 11% from 2020.

Why such a big jump? It’s hard to say exactly, but there’s reason to believe COVID-19 may have played a role there. The virus was the third-leading cause of death in the U.S. in 2021, according to the CDC.

If you have life insurance, you’ve already taken a big step toward protecting the people in your life who mean the most to you. But here are a few added steps you may need to take to ensure that you’re getting the most from your policy.

1. Make sure your beneficiaries are up to date

It may be that you’ve gotten married or divorced since putting life insurance into place. Or maybe you had a child, or a second child. These are all good reasons to update your life insurance policy. You’ll want to make sure all of the important people in your life are eligible to receive benefits if you were to pass away unexpectedly.

2. Make sure your policy has a high enough death benefit

Having some amount of life insurance is better than having none. But it’s really important to make sure that your policy has a large enough death benefit to truly cover your loved ones in the event of your passing.

Now that can mean different things. You’ll often hear that it’s a good idea to secure a life insurance payout that’s enough to cover 10 times your salary. This means that if you earn $60,000 but only have $300,000 worth of life insurance, you may not have enough.

3. Make sure your beneficiaries have the right information about your policy

Maybe your life insurance policy is set up with the right beneficiaries, and you have more than enough coverage. But do your loved ones actually know the details of your policy? If not, you should make that information available to them.

You should provide your beneficiaries with:

The name of your life insurance companyYour policy numberThe amount of coverage your policy providesThe type of policy you have (whole versus term)

If something were to happen to you, the last thing you’d want is for your loved ones to have to scramble to file a life insurance claim. Giving them the right information is an easy way to avoid that.

In an ideal world, you’ll get life insurance your loved ones don’t actually end up benefiting from. But given how many claims were paid out last year, it’s a good wake-up call to update your beneficiaries, make sure your coverage is sufficient, and give your loved ones all of the information they need to file a claim if the worst comes to be.

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