Primary vs. Contingent Beneficiary for Life Insurance Policies

Primary beneficiaries for life insurance policies are a given. If you die, you want your chosen primary beneficiary to get a death benefit.

But what happens if your primary beneficiary passes away? That’s where contingent beneficiaries come in.

Here’s what you need to know about primary vs. contingent beneficiaries for life insurance policies.

What Is a Primary Beneficiary?

When you first purchase a life insurance policy, you will decide on a primary beneficiary.  

A primary beneficiary is the person or persons that will get your life insurance death benefit when you pass.

As an example, if you’re married, you may have your spouse as a primary beneficiary. If you’re not married or are widowed, you may have your children as your primary beneficiaries (you can assign percentages to each child).

In any case, your primary beneficiary should be assigned to the person that needs a death benefit if you pass. If your spouse is reliant on your income, she should be the primary beneficiary.

If you’re using your life insurance policy as a way to pass on an inheritance to your children, they should be your primary beneficiaries.

What Is a Contingent Beneficiary?

If you and your primary beneficiary pass away, your death benefit would then go to your contingent beneficiary.

A contingent beneficiary is the person or persons that will get your life insurance death benefit if your primary beneficiary is no longer alive.

A common example is if you’re married, and you and your spouse are killed in a fatal car crash. If your spouse was your primary beneficiary, and he is no longer living, your death benefit would then go to your contingent beneficiary.

Is a Contingent Beneficiary Necessary?

We recommend every client name a contingent beneficiary on their life insurance policy or annuity contract. If you pass away and your primary beneficiary is no longer living, it’s a bit of a mess.

Technically speaking, if you did not name any contingent beneficiaries, your death benefit would be paid out to your estate. Then, that money would be subject to estate taxes and probate. Ultimately, a judge would decide who gets the life insurance money.

You can save your loved ones a lot of time, heartache, and expense by naming contingent beneficiaries.

Can a Friend or Charity Be a Contingent Beneficiary?

If you have no children, no extended family members, or are concerned about your primary beneficiary passing away, you are free to name anyone or any organization as your contingent beneficiary.

As an example, perhaps you have a lifelong friend, a church, or a charity that’s close to your heart. You can name any of these as your contingent beneficiary if you choose.  

Upon your death, your life insurance death benefit would be paid to that person or organization if your primary beneficiary is no longer living.

Conclusion

Life insurance policies provide so much peace of mind. Whether your life insurance policy will replace your income, help with funeral costs, clear up any outstanding debts, or leave a legacy, you need to ensure you have a contingent beneficiary.

Our licensed sales agents are happy to do a policy review with you to ensure your current life insurance plan meets your needs.  

We can also potentially assist with completing a beneficiary change form to ensure you have a contingent beneficiary in place.

To schedule an appointment, call our office at 217-423-8000 or schedule an appointment online using our online scheduling system.