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Ask the Life Insurance Expert

Will an insurance company pay the death benefit to beneficiaries listed in the will or beneficiaries listed on the life insurance policy?

The life insurance company will pay the death benefit to beneficiaries listed on the policy. A life insurance policy is a contract, so the company must follow what the contract states.

This is why it's so important for policyholders to review their coverage periodically, especially after major life changes, such as marriage, divorce and having children.

Imagine, for instance, a man lists his wife as beneficiary on his life insurance policy. The brief marriage ends in divorce, and the man eventually remarries. He and his new wife have children and grandchildren and live happily together for many years. But he neglects to change his policy, so when he dies, the ex-spouse is still listed as the beneficiary. Who gets the life insurance proceeds? Instead of the money going to his beloved second wife, the death benefit goes to the ex-spouse he hasn't seen in decades.

Making good financial decisions goes far beyond comparing life insurance quotes.

Besides reviewing the beneficiaries on the policy, life insurance policyholders should also review the amount and type of coverage they have. Your coverage needs may change over time. Parents of young children have different needs than empty-nesters.

Initially, you might buy term life, which covers you for a certain period, such as 10, 15 or 20 years. Then later, you may decide to convert some of that coverage to permanent life insurance, such as whole life, to cover you no matter when you die.

Maintain a good relationship with a financial adviser you trust who can guide you through these important decisions as your life changes. Besides choosing the amount and type of coverage -- term versus permanent life insurance -- you also must choose among various riders (policy add-ons) that are offered. A good life insurance agent can help you decide which riders are important for you and which you can do without.

For more, see The 9 most useful life insurance riders.

Last updated: Mar. 28, 2012