Life happens quickly. In the blink of an eye, a tragic accident or sudden illness can take someone from their family. If that person happens to be the primary beneficiary of your life insurance policy, what happens to your death benefit?<\/p>\n
It\u2019s often good to have a backup plan in life \u2013 including with your life insurance. That\u2019s where a contingent beneficiary comes into play. Here\u2019s why picking a contingent beneficiary is a smart move to help make sure your life insurance goes to those who matter most.<\/p>\n
So, what is a contingent beneficiary<\/a>, and how does this person play a role in your policy? Beneficiaries <\/a>are the people that you want to protect with the policy after your death. These people (or organization, trust, etc.) will receive the death benefit \u2013 the lump sum payment issued by the life insurance company after your death if your policy remains in place. After all, that\u2019s the reason you\u2019re purchasing life insurance: to leave behind money to support someone else\u2019s needs. You can change the beneficiary down the road if you would like to do so, but it\u2019s important to have at least one current beneficiary listed to avoid having the money go unclaimed.<\/p>\n Not all beneficiaries are the same. When you apply for life insurance, you\u2019ll be asked to list a primary beneficiary for your policy, along with any additional primary and contingent beneficiaries.<\/p>\n A primary beneficiary is the person who\u2019s first in line for your life insurance payout. This person (or people) receives the full benefit as long as they\u2019re living.<\/p>\n So, what does contingent mean in life insurance? Think of them as the just-in-case option. If the primary beneficiary has died before you, the contingent beneficiary receives the death benefit. Here\u2019s how it works:<\/p>\n Remember, the life insurance contingent beneficiary does not receive any money from the policy unless the primary beneficiary cannot do so.<\/p>\n As long as you have a primary beneficiary listed and that person can be found, not having a contingent beneficiary will not impact your policy. When you die, the primary beneficiary will receive the death benefit.However, if your primary beneficiary dies and you do not have a contingent listed, there\u2019s no one named to claim the policy\u2019s benefit.<\/p>\n In some situations, this could lead to the death benefit from the policy going to your estate. It may also lead to the death benefit being impacted by taxes paid by your estate at the time of the death. Other times, it can go unclaimed and eventually get turned over to the state.<\/p>\n That\u2019s not what you want. After all, you\u2019ve paid into this policy for years for a reason. Naming a contingent beneficiary in life insurance makes good financial sense. There\u2019s no real reason not to do so. Remember, too, that you can name more than one contingent beneficiary on a life insurance policy. If you’re unsure how to divide funds amongst your beneficiaries, consulting with a financial professional may help.<\/p>\n Finally, it\u2019s important to keep all your beneficiary information up to date. As the years go on, marriages, deaths, or births can mean new people to protect. If one of your beneficiaries passes away or you just want to have the payout go to someone else, be sure to reach out to your life insurance company to update your beneficiaries. Most insurance companies just need you to complete a simple form to make the switch.<\/p>\n Let’s say you have a term life insurance policy to cover student loan debt that your parents have co-signed. To support them in repaying the debt if something happens to you, you name your parents as the primary beneficiaries of your policy. As a contingency, you list your favorite charity as the secondary beneficiary. If heaven forbid your parents were to pass away while your policy is in force, your charitable organization would be next in line to receive the death benefit if something happened to you.<\/p>\n Buying life insurance is a dependable and affordable way to protect loved ones after your death. And taking the time to name both primary and contingent beneficiaries is a quick and easy step that can help ensure the policy payout goes where you want it to go.<\/p>\nHow do contingent beneficiaries differ from primary beneficiaries?<\/h2>\n
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What if there is no contingent beneficiary on a life insurance policy?<\/h2>\n
A death benefit can go unclaimed<\/h3>\n
A policy payout could end up with the wrong person<\/h3>\n
How does a contingent beneficiary receive money from life insurance?<\/h2>\n
Still have questions about how contingent beneficiaries work for life insurance?<\/h2>\n