Definition of a Contingent Beneficiary
Naming a life insurance beneficiary—the person who receives the policy’s death benefit—is one of the most important decisions a person can make when purchasing a life insurance policy. Most of the time, the person buying the policy names a spouse or child as their beneficiary.
But what happens to life insurance benefits if the primary beneficiary dies before the policyholder? What if they’re otherwise unable to claim the benefits? In cases like this, it’s helpful to name a secondary beneficiary, known as a contingent beneficiary, to the policy. Let’s walk through what a contingent beneficiary is and how to name one on your policy.
Who can be a contingent beneficiary?
In general, a contingent beneficiary can be anyone the primary beneficiary chooses. Contingent beneficiaries are often close family members, such as spouses, children, or siblings. However, they don’t necessarily need to be related or even close to the primary beneficiary—you could even name a trust or charity as a contingent beneficiary. Having a contingent beneficiary helps ensure that your policy’s benefits are still distributed according to your wishes, even if the primary beneficiary is unable to receive them.
What is the difference between a primary and contingent beneficiary?
A primary beneficiary is the person who will receive the proceeds of a life insurance policy upon the policyholder’s death. You have the option to choose any adult as your primary beneficiary, as long as there is no legal dispute regarding your choice. Keep in mind that if multiple primary beneficiaries are named, each one will receive an equal share of the death benefit, rather than one beneficiary getting more than the other.
A contingent beneficiary, however, is someone who will only be eligible to receive your life insurance benefits if all of the primary beneficiaries have passed away before receiving them. If you don’t name a contingent beneficiary and your primary beneficiaries are not available, the death benefit goes to your estate, where it may be subject to estate taxes. In some cases, the death benefit can be distributed to creditors instead of family members who may be expecting it. Therefore, it’s recommended to have both a primary and contingent beneficiary for the extra peace of mind surrounding your loved ones’ financial security.
How do I add a contingent beneficiary if I don’t have one?
If you don’t have a contingent beneficiary currently named, don’t stress. Adding a contingent beneficiary to your policy is a simple process that requires some simple paperwork. Here’s what you’ll need to do:
Contact your insurance provider for any applicable forms or documents to add a contingent beneficiary. Many insurance companies make these forms easy to download via their website.
Fill out the form with all of the necessary information, including the name and address of the contingent beneficiary.
Ensure the form is signed by both you and the contingent beneficiary.
Send the form to your insurance provider so that they can officially add a contingent beneficiary to your policy.
In rare cases, an additional fee may be required in order for the contingent beneficiary to be added. Most policies don’t require this extra cost. It’s important to note that if you make any changes to your primary beneficiaries at any point during your policy’s life cycle, any previously named contingent beneficiaries will be removed from it automatically and will have to be re-added to the policy.
Let SelectQuote Help Answer All Your Beneficiary Questions
Knowing when, how, and who to name as a contingent beneficiary is an essential part of purchasing life insurance. SelectQuote’s licensed insurance agents can help you walk through the process of shopping for life insurance that meets your needs and can help protect your beneficiaries after you’re gone. When it comes to shopping for life coverage, we bring more than 40 years of experience to the table. Let us do the heavy lifting to compare quotes on your behalf, helping find a policy that works for your budget.
