Contingent Beneficiary for Life Insurance: What You Need to Know

Clifford PendellWritten by Clifford Pendell
Louis LopesReviewed by Louis Lopes, CLU ChFC

When you apply for life insurance, your agent will ask you if you would like to list a contingent beneficiary.

For many people this question comes as a surprise, and oftentimes our client’s ask us: 

‘What exactly is a contingent beneficiary and why do I need one?’

In this insider’s guide we’ll explain the purpose of a contingent beneficiary and offer some advice to help you determine the best individual or individuals to name on your policy for this purpose.

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What is a Life Insurance Beneficiary

When you purchase life insurance, you will be required to list at least one beneficiary on your application. This entity will be listed as the policy’s primary beneficiary, and they will be first in line to receive the payout from your life insurance when you pass away.

Most people list an immediate family member as their primary beneficiary, or whomever is most reliant on them for financial support. A primary beneficiary can also be a business, trust, estate, or charity, depending on your reason for purchasing life insurance.

You can also list multiple primary beneficiaries in your policy. An example of this might be to name your adult children as 50/50 beneficiaries. In this scenario, when you pass away, each child will receive half of your policy’s death benefit.

But what if something were to happen to your primary beneficiaries? Where would you want your life insurance payout to go if this person or entity was no longer around? This is the purpose of naming a contingent beneficiary.

What is a Contingent Beneficiary?

A contingent beneficiary is second in line to receive the proceeds from your life insurance policy if your primary beneficiaries were to pass away. When working with a client, we explain a contingent beneficiary as follows:

“If something were to happen to you and your primary beneficiary, who would you want your life insurance proceeds to go to?”

Most of our clients purchase life insurance to provide for their dependent families and children, so in this scenario we sometimes preface the situation as, ‘Suppose you and your spouse were in an accident, who would you trust with your children’s finances?’

If your children are minors, a probate court will step in to ensure that the proceeds from your life insurance policy are directed to where you intended, but you should still list an individual or entity that is financially savvy and trustworthy. 

Oftentimes, our clients will name a close relative or parent in this scenario. Whomever they would entrust with raising their children if they were no longer around.

Types of Beneficiaries Chart

Primary BeneficiaryContingent Beneficiary
The first in line to receive the proceeds from you life insurance policy when you pass away.Will receive the proceeds from you life insurance policy if none of your primary beneficiares are living when you pass away.

Do I Need to List a Contingent Beneficiary?

You are not required to list a contingent beneficiary when purchasing life insurance, but we recommend it. If your primary beneficiary is not alive to receive the death benefit from your policy, and you do not have a contingent beneficiary, your life insurance proceeds with be paid to your estate.

In such a scenario, your estate will enter probate, during which a judge determines the allocation of your assets. This also grants creditors access to your policy’s death benefit to settle any outstanding debts or unforeseen medical bills you may leave behind.

For those with a sizable estate, the life insurance payout might also be subject to federal or state estate taxes. This situation occurs when your assets exceed the current federal and/or state estate exemption, particularly in states like Oregon where the exemption is only $1,000,000.

However, if you have a contingent beneficiary, the entire death benefit from your life insurance policy will be paid out as a tax-free lump sum. This approach avoids the probate process and possible claims from creditors or the government.

Frequently Asked Questions

Can I List My Child As Contingent Beneficiary?

Yes, you can list your minor child or children as primary or contingent beneficiaries on your life insurance policy, however it is important to note that an insurance company will not directly pay a minor. Instead, the funds will be held in probate until the minor(s) reach the age of 18, or the court assigns a guardian. The appointed guardian will have access to the funds to cover the minor(s)' living expenses until they come of age.

What's the Difference Between Primary and Contingent Beneficiary?

A primary beneficiary is the first in line to receive the death benefit from your life insurance policy. A contingent beneficiary is second in line, and will only receive a payout from your life insurance policy if both of your primary beneficiaries are deceased.

Who Should I List As Contingent Beneficiary?

Your contingent beneficiary should be someone you trust to manage your assets when you pass away. If you have minor children, this individual should be someone you trust to handle their future finances responsibly.

Still Have Questions? We Can Help

If you need help determining who to list as your policy’s primary or contingent beneficiary, we’re here to provide you with the advice you need to make an informed decision.

JRC is an independent life insurance agency that represents 63 highly rated insurance providers. Having access to dozens of companies allows our agents to anonymously shop the market on your behalf, matching you with the best policy for your needs and risk profile.

Our licensed agents offer at least 10 years of life insurance experience, and we’ve helped thousands of families with their insurance needs. Most importantly, our impartial shopping services are completely free, and there is no cost to apply for a policy.

Connect with us at 855-247-9555 or enter your information into the form below to instantly compare life insurance rates from more than 50 providers.

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Written by:

Clifford Pendell

Clifford Pendell

Managing Partner and Co-founder

Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.

Expert reviewed by:

Louis Lopes

Louis Lopes, CLU ChFC

Chartered Life Underwriter, Licensed Life and Health Agent

Louis has been in the insurance business for over 30 years. He specializes in “high risk” cases as well as more complex coverages for long term care, disability, and estate planning.

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