What is a contingent beneficiary?

Document with title contingent beneficiary

Definition of a Contingent Beneficiary

Naming a life insurance beneficiary—the person who receives the benefits after death—is one of the most important decisions a person can make when buying a life insurance policy. Most of the time, the person buying a policy names a spouse or child as their beneficiary.

But what happens to life insurance benefits if the primary beneficiary dies before the insured? What if they’re otherwise unable to claim them? In cases like this, it’s helpful to sit down and name a secondary beneficiary, known as a contingent beneficiary, to the policy.

Who can be a contingent beneficiary?

A contingent beneficiary can generally be anyone the primary beneficiary chooses. They don’t necessarily need to be related or even close to the primary beneficiary. The contingent beneficiary needs to be named in the policy, otherwise, they will not receive any money if something happens to the primary beneficiary.

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 death of the insured. The policyholder has the option to choose any adult as their primary beneficiary, as long as there is no legal dispute regarding that choice. It’s essential to keep in mind that if multiple primary beneficiaries are named, rather than deciding who gets more and who gets less, each one will receive an equal share of the death benefit.

A contingent beneficiary, on the other hand, is someone who can only become eligible to receive life insurance benefits in the event that all of the primary beneficiaries have passed away before receiving them. If a policyholder does not name a contingent beneficiary and their primary beneficiaries are not available, the death benefit goes to the policyholder’s 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, experts recommend having both a primary and contingent beneficiary for maximum protection and peace of mind concerning your family’s financial security.

How do I add a contingent beneficiary if I don’t have one?

Adding a contingent beneficiary to your policy is a simple process that requires some paperwork. Here are the steps:

  1. 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. 
  2. Fill out the form with all of the necessary information, including the name and address of the contingent beneficiary. 
  3. Ensure the form is signed by both you and the contingent beneficiary.
  4. 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. At SelectQuote, our 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 35 years of experience to the table. Let us compare prices and help find a policy that works for your budget. From term life policies to safeguard income to a whole life policy that can help build wealth for retirement, we’ll help you compare rates and answer any questions you have about your potential coverage.

We do the shopping. You do the saving.