What Is a Contingent Beneficiary in Life Insurance?
<lingo>A contingent beneficiary is a person who receives the death benefit associated with your life insurance policy if the primary beneficiary dies or is otherwise unable to receive the funds. In most life insurance policies, the beneficiary is named and will receive the funds from the death benefit or any other value that is created over time using the life insurance policy. However, a contingent beneficiary is nearly always listed and works much like a backup in case the other person is unable to receive the funds for any reason.</lingo>
Contingent Beneficiary Briefly and Clearly Explained
The primary beneficiary of any life insurance policy is the person or organization that is chosen by the policyholder to receive funds at the time of the covered party’s death. For example, a couple may take out a life insurance policy on the husband and names the wife as the beneficiary. If the husband dies while the policy is still in place, the wife receives the proceeds from the policy, called the death benefit. The wife, in this cases, is the primary beneficiary.
<twitter>A contingent beneficiary is a person who receives the death benefit associated with your life insurance policy if the primary beneficiary dies or is otherwise unable to receive the funds.</twitter>
The contingent beneficiary, then, is the person or organization that is listed as the second person to receive those funds if the primary beneficiary dies or otherwise cannot. In the above scenario, the couple may list their son as the contingent beneficiary. If the husband dies, but the wife has already died prior to his death, the son would receive the proceeds from the life insurance policy.
The person taking out the life insurance policy picks both the primary and the contingent beneficiaries. This can be anyone such as a spouse, another relative, a child, or someone not related to the individual. It can also be a charity you wish to leave the funds to or an organization that you wish to contribute to. It can also go to a trust, which can give you more control over how the funds are spent.
It is important to list both primary and contingent beneficiaries. However, it is also important for you to update this information from time to time.
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