Pets And Life Insurance - Everything You Need To Know
68% of households in the United States have pets – it’s no surprise that many Americans love their furry friends and want to ensure their well-being.
You can guarantee the financial protection of your family members by naming them as your life insurance policy beneficiaries. But can you do the same with your pets?
The short answer is no – but there are other things you can do to make sure your pets are protected. Our quick guide will answer why you can’t name pets as life insurance beneficiaries and what options you have instead.
Pets As Life Insurance Beneficiaries
No matter the kind of animal you own, whether dog, cat, bird, etcetera, pet care will cost you a lot of time and money. Between food, veterinary visits, and other expenses, you could be looking at thousands of dollars over their lifetime. It’s understandable for pet owners to worry about who can continue to provide for their furry friends if they pass away.
If you want to guarantee your beloved pet care and protection even if you’re no longer around, you’ll want to have financial safeguards in place. Unfortunately, you won’t be able to do this by naming your pets as your life insurance beneficiary.
This is because your pet can’t go through the processes necessary to receive the death benefit from your life insurance policy. Life insurance products will need you to file an insurance claim, open a bank account, and sign legal documents before receiving the payout. Thankfully, this isn’t the only option you have!
Options For Your Pet
Since life insurance policies, unfortunately, don’t extend to your furry friends, there are other measures you can take, including legally binding ones.
Naming Your Pet Caregiver As Your Beneficiary
This is one of the simplest ways to ensure there is someone to take care of your animals and allow them to continue to live good lives even after their original pet owner’s death. If you have a life insurance policy, you can choose trusted partners or a person in your family as your pet’s new caregiver and name them as one of your beneficiaries. This way you can leave money and instructions to a person you know who can take care of your pet.
If you have more than one beneficiary, make sure to indicate the amount that goes to each of them, otherwise, the funds will be split evenly. This method has the least legal hassle, however, there are no checks and balances to guarantee your chosen caregiver will use the money for its intended purposes.
Trusts are legally binding documents outlining a specific plan for what will happen to a specified amount of your money. Unlike life insurance, a pet owner can set up a trust agreement for their pet. If a trust is set up before purchasing life insurance, you can name the pet trust as one of your insurance beneficiaries so the proceeds can go to the care of your pet.
Setting up a trust also involves picking a person to be your trustee or caregiver. They need to sign a document wherein they agree to take care of your pet in the manner that you dictate using the funds you allot. The trustee will also be the one to receive the fund.
Standalone pet trusts can be complex and should be created by an attorney that specializes in property or estate planning and animal law. The upside with this type of trust is that this won’t have to go through probate court, which is a judicial section that handles things like wills, estate, and property ownership, conservatorships, etcetera. A pet trust can be complicated to set up, but if you plan to leave a large amount of money or are worried your family won’t take care of your pet, this may be your best option.
Pet trusts are legal in all states and the District of Columbia. They typically last 21 years but keep in mind that they can vary from state to state. It’s best to get information about your state laws, especially if you have pets with longer life spans than a dog or cat, including birds or horses.
Pet Protection Agreement
A pet protection agreement is similar to a pet trust in that you can select someone to take care of your pet and have a legal system to ensure your wishes are being carried out. It differs in that it isn’t centered around what to do with your money, and you don’t need an attorney to draft it. You can opt to leave a fund but this is optional.
This agreement is a legal document stating instructions about how you, the pet owner, want your pet to be taken care of and who you choose to do it. You can get as specific as dictating what brand of food you need your pets to be fed. This can be enforced even before you pass away, such a debilitating accident.
If you do decide to leave an amount of money, you can nominate a “Distribution Representative” that you trust to handle the funds. This creates a system of checks and balances, which can be the best way to guarantee your instructions are carried out.
Pet insurance is another form of financial protection but instead, it benefits you while you’re alive. This may be something you never knew existed. Much like a health insurance policy for people, pet insurance allows you to be reimbursed for veterinary medical expenses in case something bad happens.
You can also opt for pet life insurance, but these products are much less common and mainly used for show dogs. These types of products guarantee users an amount from the pet life insurance company if their pet dies.
Be sure to get advice about these products from financial professionals before committing to anything right away.
The Bottom Line
Even though you can’t directly name them as your life insurance beneficiary, there are many other things you can do to ensure their wellbeing. If you have any questions about anything we’ve discussed, want more tips about your finances, or need insurance policy quotes, contact us at Wesley Insurance, LLC! We’ll get you all the information you need.