Life Insurance

Understanding Primary vs Contingent Beneficiaries in Life Insurance

Kyle Fanthorpe | Mar 28, 2024
contingent beneficiary vs primary beneficiary

When setting up a life insurance policy, you will be asked to designate primary and contingent beneficiaries who will receive the death benefit. You’ll also be asked to specify your "primary beneficiary" and your "contingent beneficiaries." Understanding the difference between these two designations is crucial for ensuring that your life insurance proceeds are distributed according to your wishes.

What is a primary and contingent beneficiary?

The primary beneficiary is the individual or entity designated to receive the life insurance death benefit upon the policyholder's demise. This designation is the first in line to receive the proceeds, and the entire payout goes to the primary beneficiary if they are alive and eligible to receive it. A policyholder can designate one or multiple primary beneficiaries and specify the percentage or share of the death benefit each should receive.

Choosing a primary beneficiary allows the policyholder to ensure that the intended recipient receives the life insurance proceeds directly and without complications. This designation provides a straightforward way to allocate the financial support to the people or organizations that matter most.

A contingent beneficiary, on the other hand, comes into play if the primary beneficiary is unable or unwilling to receive the death benefit. This may happen due to the primary beneficiary predeceasing the policyholder, refusing the benefit, or facing legal restrictions that prevent them from receiving the proceeds.

Contingent beneficiaries, also called secondary beneficiaries, serve as a backup plan, stepping in to receive the life insurance payout if the primary beneficiary is unavailable. Similar to primary beneficiaries, a policyholder can name one or more contingent beneficiaries and allocate specific shares of the death benefit to each.

Primary beneficiary vs secondary beneficiary: why you need both

While designating a primary beneficiary is a common practice, overlooking the importance of contingent beneficiaries can lead to unintended consequences. Failing to name a contingent beneficiary or updating the designation when life circumstances change may result in complications if the primary beneficiary is unable to receive the payout.

For example, if a policyholder names a spouse as the primary beneficiary and they pass away together in a tragic accident, having a contingent beneficiary ensures that the proceeds are distributed according to the policyholder's wishes, even in unforeseen circumstances.

How to choose your primary and contingent beneficiaries

Here are several factors to keep in mind when choosing your primary vs. secondary beneficiaries.

Family and relationships: Consider the needs of your immediate family. Spouses, children, or other dependents may be primary beneficiaries. Factor in the stability of relationships and potential changes in family dynamics.

Financial dependence: Identify individuals or entities financially dependent on you, such as a spouse, children, or elderly parents. Ensure that the life insurance proceeds adequately address the financial needs of your beneficiaries.

Minors and incapacitated beneficiaries: If you intend to name minors as beneficiaries, consider establishing a trust or custodial account to manage the proceeds until they reach a specified age. Plan for the financial well-being of beneficiaries with special needs or those who may be incapable of managing the funds independently.

Communication: Discuss your intentions with your primary or contingent beneficiaries to ensure they are aware of their potential roles and responsibilities. Keep open lines of communication to address any concerns or changes in circumstances.

Professional advice: Seek guidance from financial advisors, estate planners, or legal professionals to ensure that your beneficiary designations align with your estate plan.

By carefully considering these factors and staying proactive in reviewing and updating your beneficiary designations, you can help ensure that your life insurance proceeds are distributed according to your wishes and meet the needs of your loved ones.

Regularly review and update your beneficiaries

Circumstances can change over time – marriage, divorce, the birth of children, and other life events may necessitate a review and update of life insurance beneficiary designations. Regularly revisiting and adjusting these designations ensures that your chosen beneficiaries accurately reflect the policyholder's current wishes and family dynamics.

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Are you required to choose a contingent beneficiary?

The selection of contingent beneficiaries for a life insurance policy is generally optional, but it’s smart to give it some serious thought. A contingent beneficiary is someone who would receive the death benefit if the primary beneficiary is unable to do so, often due to predeceasing the policyholder or being unable to claim the benefit for some other reason.

Though naming a contingent beneficiary may not always be required, it is a prudent step to take to ensure that there is a clear plan in place for the distribution of the death benefit in case the primary beneficiary cannot receive it. If you don't designate a contingent beneficiary and the primary beneficiary is unable to receive the proceeds, the death benefit may be paid to your estate, and it would then be subject to probate or other legal processes.

The ability to name contingent beneficiaries and the specific rules governing life insurance policies can vary based on the insurance company and the policy itself. It's important to review the terms and conditions of your life insurance policy and consult with your insurance agent or legal advisor to ensure that you understand the options available to you and that your wishes are appropriately documented.

Make sure your wishes are carried out

Understanding the distinction between primary and contingent beneficiaries is essential for individuals seeking to maximize the effectiveness of their life insurance policies. Thoughtful consideration and periodic reviews of primary or contingent beneficiary designations help ensure that loved ones receive the intended financial support during challenging times. Understanding how beneficiaries work can help you make informed decisions that fit in well with your financial and estate planning goals.


What happens to your life insurance if you don't have a living beneficiary and you die?

If you pass away and you do not have a living beneficiary designated on your life insurance policy, the proceeds from the policy typically become part of your estate. In such cases, the distribution of the life insurance proceeds may be subject to the probate process, which is the legal procedure for settling the estate of a deceased person.

The probate process involves validating the deceased person's will (if there is one), paying off debts and taxes, and distributing the remaining assets to the heirs or beneficiaries. If there is no will, the estate would be distributed according to the laws of intestacy in the jurisdiction where you reside. These laws generally prioritize close family members such as spouses, children, or parents.

It's important to note that the probate process can be time-consuming and may involve legal fees. Designating a living beneficiary helps expedite the payment of life insurance proceeds to your named beneficiaries, bypassing the probate process.

To ensure that your life insurance benefits are distributed according to your wishes and to avoid potential delays and complications, it's advisable to regularly review and update your beneficiary designations. Additionally, you may want to consult with legal and financial professionals to ensure that your overall estate planning is in order.

Can you choose a charity as your beneficiary?

Yes, it’s often possible to name a charity as the beneficiary of your life insurance policy. This is known as making a charitable bequest through a life insurance policy. When you designate a charity as the primary beneficiary, the proceeds from the policy will be paid to the charitable organization upon your death.

To do this, you typically need to provide the full legal name and other relevant details of the charity when completing the beneficiary designation form. You may also need to specify the percentage or a specific amount of the death benefit that you want to allocate to the charity.

Naming a charity as your life insurance beneficiary can be a meaningful way to support a cause you care about. It's important to keep the beneficiary designation up to date, especially if there are changes in your charitable preferences over time.

Some insurance companies may have specific procedures or requirements for designating charitable beneficiaries, so be sure to carefully follow their guidelines during the process.

Can you change your beneficiaries for life insurance?

Yes, in most cases, you can change the beneficiaries on your life insurance policy. Life insurance policies typically provide policyholders with the flexibility to update their beneficiary designations during their lifetime. Life events such as marriage, divorce, the birth of a child, or changes in relationships may prompt individuals to review and update their beneficiaries.

To make changes to your life insurance beneficiaries, you will need to contact your insurance company and follow their specific procedures. This may involve completing a beneficiary change form provided by the insurance company, which can sometimes be done online. It's important to provide accurate and detailed information about the new beneficiaries, including their full legal names, dates of birth, and any other required details.

After submitting the necessary documentation, the insurance company will update their records accordingly. 

It's a good practice to review your life insurance beneficiary designations periodically, especially after major life events or changes in relationships, to ensure they reflect your current intentions. If you have any questions or concerns about the process, it's advisable to contact your insurance provider or seek guidance from a financial advisor.

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