You need to prepare a will identifying a gaurdian for all your shildren in the event of your death. Pick someone who is willing and stable. With your fiance as primary beneficiary, he do whatever he wants with the money and is not required to use any of it for the children. You need to consult a probate attorney to help you plan ahead.
I agree with Ms. Trevino, and want to stress that life insurance proceeds do not pass through your estate. They are paid directly to the beneficiary. Either work with the insurance company to split the proceeds, or have it paid to a trustee that will distribute the proceeds according to the trust directives.
First you need a Will expressing Guardians for your Children. Next you need to contact your insurance Company as the proceeds pass outside the Will. You will need to leave the proceed "in trust" to your children, nameing the Guardian as trustee or anyone else that you want.