There’s a lot that goes into setting up a life insurance policy. You have a number of steps to go through and a number of decisions to make.
Once you’ve decided what type of life insurance policy to get, what company you’re going to get it from and have gotten approval to get the policy, you’ll have to choose your beneficiaries.
You’ll definitely want to name a primary beneficiary to your policy. But what if something happens to your primary beneficiary and they cannot get the life insurance payout if you pass away? For instance, this could happen if your primary beneficiary passes away before you do.
Well, that is why there is what we call a contingent beneficiary. Let us explain more about contingent beneficiaries down below.
What Does Contingent Mean In Life Insurance?
In the case your primary beneficiary passes away or becomes impaired, the contingent beneficiary acts as a backup. If your primary beneficiary is unable to claim the payout for whatever reason, your contingent beneficiary will be able to claim the life insurance death benefits.
So basically, this is having a contingent plan in place for your life insurance. You’ve been paying for the plan for a long time. So, if something were to happen to the primary beneficiary, you definitely want someone to benefit from your policy. They can also be called a secondary beneficiary.
Now, how does assigning contingent beneficiaries work?
How to Assign a Contingent Beneficiary
Much like how you assign a primary beneficiary in your will, you can assign the contingent beneficiary for life insurance. And you can place any conditions that you want on how this works.
The contingent beneficiary will receive nothing from the life insurance policyholder if the primary beneficiary is still alive and accepts the inheritance. For example, if I am the insured and I placed my eldest son to be the primary beneficiary, he will inherit my full life insurance death benefit at my passing.
However, suppose my son refuses the claim or can no longer claim my life insurance death benefit. In that case, the secondary, or contingent, beneficiary, such as my business partner, can claim the life insurance payout. But, again, this may only happen if the primary beneficiary cannot claim the life insurance death benefit.
Who Can Be a Contingent Beneficiary?
So who exactly is eligible to be contingent beneficiaries? The criteria for selecting a secondary beneficiary are similar to selecting a primary beneficiary.
This can include people, organizations, charities, trusts, or even your real estate. Usually, contingent beneficiaries are other family members, close friends, and other relatives listed.
Those who are not eligible to be contingent beneficiaries are the same as primary beneficiaries. This includes minor children and pets.
Minor children are only allowed to be included in a life insurance policy if they have a legal guardian appointed to oversee the life insurance death benefit until the minor reaches legal age.
So, in conclusion, a contingent beneficiary is essentially a backup or secondary beneficiary who can claim the life insurance death benefit if the primary beneficiary cannot.
