Life insurance is a great way to protect our loved ones, but can I name my pet as a beneficiary in my life insurance?
Life insurance is indeed a powerful way to protect our loved ones against financial hardship and minimize financial risk when we die. There are many reasons to get an insurance policy; one is to protect your pet. It is true that some people consider their pets a member of their families and want to ensure their pets are being looked after when they pass away, but can you name a pet as a beneficiary?
Many of us have pets, and we love them. Whether you have a pet dog, cat, snake or any other pets you care for, you do not want to leave them unattended if you pass away. Some people treat their pets as their children, so it is only natural to consider what will happen to them if something happens to them.
However, if the plan is to name the pet as a life insurance beneficiary, you need to alter your plan. Pets can not be named as the beneficiaries of a life insurance policy. If you ask why? Well, it’s because life insurance pays a lump sum amount called a death benefit when the insured dies, and pets do not have bank accounts, nor can they spend money. Still, some steps can be taken through your life insurance policy to protect your pets if you die.
Why can pets not be named as life insurance beneficiaries?
Most people will name their dependents as their life insurance beneficiaries, such as children, spouses, or even aging parents. Therefore, most beneficiaries are human, and there is a reason for it. When the time comes for the death benefit to be paid out to the beneficiaries, the legal proceedings require the beneficiary to sign legal documents, have a bank account and file a death benefits claim which pets can not do.
More and more people are becoming pet owners and are attached to their pets. Statistics show that in 2020, 58% of Canadian households reported owning at least one dog or cat, which is increasingly growing. However, there is still no way to name a pet as a life insurance beneficiary directly. Although you can take the following steps to make sure your favourite non-humans are being looked after.
What steps should I take to protect my pet with life insurance?
We already established that your life insurance beneficiary needs to be a human, a trust or a charitable organization to take care of the life insurance proceeding and receive the death benefit. Though, you can name someone to whom you are planning to assign your pet guardianship as your life insurance beneficiary. Naming your pet guardian is a crucial step to pet ownership because if you don’t and something happens to you, your pet will end up in a shelter.
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Steps to take to protect your pet:
Name a caretaker for your pet
If you are a pet owner, you must consider naming someone to look after your pet when you die. This is the person you are trusting to be responsible for your pet and receive the death benefit on behalf of your pet. The caretaker probably needs food, toys, equipment, veterinary, medicine and more funds.
Name the caretaker as your life insurance beneficiary
You can name your caretaker on your life insurance policy as a beneficiary and provide some details and description on why this individual is a beneficiary and how the fund will be spent, but if you truly want to ensure the funds are spent correctly and to your liking, you do need to set up a trust.
You can have multiple life insurance beneficiaries. Since you may have other dependents and do not have or want to purchase multiple life insurance policies, you can allocate a specific amount of the life insurance coverage for your pet and allocate the rest as you see fit. For instance, 30% of the life insurance benefits for the caregiver and 70% for your children.
Set up a life insurance trust.
Trust is a legally binding financial plan for what happens to your money when you die. Since there is almost no oversight of how your money will be spent when you die, setting up a trust is a smart way to ensure your money is being spent wisely. This requires more planning, but with trust, there is legal oversight of how the money is being used. You can be specific on how you want the money to be used on your pet.
To sum up, you can not literally name your pet as a life insurance beneficiary. However, you can take steps to use life insurance to protect your pet when you die. if you are a pet owner and love your pet, pick a caregiver for your pet, name that person your life insurance beneficiary, and set up a trust.
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