Category Archives: Life Insurance
One of the main reasons that lead people to take out life insurance is to provide a beneficiary with the proceeds of the policy when the named insured passes away. However, many times, there is more than just one beneficiary and here is where confusion takes place. If you are considering buying life insurance, or if you have already a life insurance policy, this reading can help you to clarify what is contingent beneficiary and how to add this beneficiary to your life insurance policy.
- Understanding the Different Types of Beneficiaries
Know there are not as many type of beneficiaries to make more confusing this topic, but there are certainly two types of beneficiaries: primary and contingent. The primary beneficiary is entitled to receive the proceeds at the death of the insured person and this beneficiary can be a specific person or a group of people that is properly called a class designation.
A contingent beneficiary, or secondary beneficiary, is entitled to the proceed of the insured individual only if the primary beneficiary passes away before the insured person, and it is possible add more that a contingent beneficiary to a life insurance policy to make sure there will always be a beneficiary that is going to receive the proceeds.
- Why a Contingent Beneficiary is Often Necessary
The primary beneficiary could be anyone, but often the closer is the relationship between the insured person and the beneficiary, the more important that is adding a contingent beneficiary or beneficiaries to a policy. In example, if you are too young and single you might be entitling your parents to receive your proceeds, but eventually you can marry and add your spouse as contingent beneficiary, and then your children as tertiary beneficiaries or vice versa.
- Who Will Receive My Proceeds?
Either in wills or in life insurance, the primary beneficiary is who receives all the proceeds or assets that the person who have died has left. A contingent beneficiary will not receive anything unless the primary beneficiary dies before the insured person, and yet subsequent beneficiaries will not receive anything either unless both the primary and contingent beneficiaries pass away before him or her. Attorneys and life insurers may help you to find a workaround to make possible all the beneficiaries receive a part of the assets or a proceeds share, but this situation needs to be discussed directly with them to leave everything according your wishes.
- Adding a Contingent Beneficiary to Your Policy
You can add a contingent beneficiary at the moment to take out your life insurance, or at a later time. Insurance companies will let you know about the importance to review and update periodically your life insurance policy, moment at which you can request the addition of the contingent beneficiary. Updating your beneficiary designations can happen as often as you need to make changes, but keep in mind that in some states is only allowed name your family and relatives as beneficiaries, and that naming children will require that you appoint a tutor or guardian until they reach adulthood.