What is a Contingent Beneficiary?
A Contingent Beneficiary is an individual or entity named in a life insurance policy to receive the death benefit if the primary beneficiary is unable or unwilling to claim it. This situation might occur if the primary beneficiary predeceases the insured, cannot be located, or declines the inheritance. In such cases, the contingent beneficiary steps in to receive the insurance proceeds, providing a clear succession plan for the policy’s payout.
Having a Contingent Beneficiary ensures that the death benefit is properly distributed according to the policyholder’s wishes, even if the primary beneficiary cannot fulfill the role. For example, a policyholder might name a spouse as the primary beneficiary and their child as the contingent beneficiary. If the spouse passes away before the policyholder, the death benefit would go to the child as the designated contingent beneficiary.
It is important to update both primary and contingent beneficiaries periodically to reflect any changes in family circumstances, relationships, or financial plans. Properly designating a contingent beneficiary helps avoid complications and ensures that life insurance benefits are distributed as intended.