Life insurance provides financial support to your loved ones if you pass away. If the unexpected happens, a life insurance policy ensures money goes to your beneficiaries with minimal difficulty.
A beneficiary is the person you choose to receive your death benefit.1 In some cases, your primary beneficiary may not be able to accept the death benefit due to death, refusal, or incapacity. In this case, the benefit will go to your chosen contingent beneficiary.
Here’s what you should know about contingent life insurance beneficiaries.
Contingent beneficiaries are also commonly referred to as secondary beneficiaries. If the primary beneficiary can’t or won’t receive the death benefit, a contingent beneficiary will receive the death benefit.
When you buy a life insurance policy, you’ll choose both your primary and contingent beneficiaries. Make your primary beneficiary the first person you’d like to receive your death benefit. Your contingent beneficiary should be the next person you want your benefit to go to if the primary beneficiary passes away or is unable to receive it for some reason.
If you have a life insurance policy that has a primary beneficiary, it’s important that you name a contingent beneficiary. Ensuring you have a backup to receive the death benefit if your primary beneficiary can’t helps you avoid delays or confusion around who should receive your benefit.
Here are several reasons to name a contingent beneficiary:
Financial security: Contingent beneficiaries provide extra security for your loved ones, ensuring your death benefit gets in the right hands.
Avoids confusion: Naming a contingent beneficiary makes distributing your death benefit less confusing if your primary beneficiary is unable to receive it.
Peace of mind: Having a contingent beneficiary will give you some peace of mind knowing that your death benefit is secure if something happens to your primary beneficiary.
A contingent beneficiary could be anyone you choose, but typically it’s a family member, friend, or charitable organization. It’s entirely up to you, the policyholder, to choose who you want to be your contingent beneficiary.
Common contingent beneficiaries include children, siblings, or other relatives who you believe could need financial support if you pass away.
Assess the following before choosing your contingent beneficiary:
Consider financial needs. Pick somebody you know would most need financial support if you’re no longer there for them.
Think about usage. Consider how your contingent beneficiary might use the death benefit and make sure it aligns with your values.
Adjust if necessary. As life goes on, re-evaluate your choice for your contingent beneficiary and make sure you’re still comfortable with it.
If you don’t name a contingent beneficiary and your primary beneficiary can’t receive your death benefit, the money will typically go to your estate. This means it’ll have to go through probate, a legal process that determines who should receive benefits.
The probate process can lead to delays, estate taxes, and extra legal expenses, reducing the value of the death benefit. Naming a contingent beneficiary provides extra protection to avoid this undesirable outcome.
Life insurance payouts are fairly straightforward. Your insurance company will first reach out to the primary beneficiary. If they can’t receive the death benefit, the insurance company will next contact the secondary beneficiary. Your insurer may require a death certificate before it pays the death benefit, and it may request proof of identity from your contingent beneficiary to verify who they are.
Complications can arise if you forget to update your contingent beneficiary after a life change (such as a divorce or the death of the contingent beneficiary), if the contingent beneficiary is a minor, or if there are family disputes about eligibility. In some cases, the money may be held in trust while the issue is resolved, which can occasionally require court intervention.
The cost of life insurance depends on numerous factors, including your age, gender, health, lifestyle, coverage amount, family medical history, and term length. Take a look at how much your age, gender, and coverage amount can affect your monthly premium.
Buying life insurance is a fairly straightforward process.2 Follow these steps to get a policy:
If you still have questions about secondary beneficiaries, this additional information below can help.
Anyone can be a life insurance beneficiary, including family members, friends, relatives, and business partners.3 Life insurance beneficiaries can even be entities like charities, trusts, or businesses.
Yes. You can have two primary beneficiaries. You’ll need to specify the percentage of the benefit that each beneficiary will receive to ensure the payout is divided correctly.
In most cases, you should make your child a contingent beneficiary rather than a primary beneficiary, as minors can’t receive benefits directly without a legal guardian or trust in place.
Yes. A friend can be a contingent beneficiary. Make sure you choose someone you trust to receive your benefit if your primary beneficiary can’t.
The primary beneficiary rule states that the primary beneficiary is the first person in line to receive the death benefit, and that it’ll only go to the contingent beneficiary if the primary beneficiary can’t accept the benefit.
At Insurify, our goal is to help customers compare insurance products and find the best policy for them. We strive to provide open, honest, and unbiased information about the insurance products and services we review. Our hard-working team of data analysts, insurance experts, insurance agents, editors and writers, has put in thousands of hours of research to create the content found on our site.
We do receive compensation when a sale or referral occurs from many of the insurance providers and marketing partners on our site. That may impact which products we display and where they appear on our site. But it does not influence our meticulously researched editorial content, what we write about, or any reviews or recommendations we may make. We do not guarantee favorable reviews or any coverage at all in exchange for compensation.
)
)
)
)