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When you purchase a life insurance policy, you must name a primary beneficiary. The primary beneficiary is the person that receives the death benefit after you die. But if the primary beneficiary is unable to accept the death benefit because they died, the benefit will go to your contingent beneficiary, also called a secondary beneficiary. Think of this person as a backup beneficiary so that the death benefit is spent the way you intended it — otherwise it may go to your estate and go through probate.

“In case your primary beneficiary predeceases you, you should also name contingent beneficiaries,” says Stafford Thompson Jr., senior vice president of life product management for Lincoln Financial Group.

You can have more than one primary or contingent beneficiary. 

Read on to learn more about contingent beneficiaries and why you should add at least one secondary beneficiary to your life insurance policy. 

Key Takeaways

  • A contingent beneficiary is a secondary beneficiary who receives a death benefit if the primary beneficiaries aren’t able to collect it.
  • Contingent beneficiaries are often children, potential guardians to the policyholder’s children, family members, friends and charitable organizations.
  • You don’t have to assign a contingent beneficiary, but it can be a wise decision.
  • A policyholder may name as many life insurance policy beneficiaries as he or she wants.
  • If both the primary and contingent beneficiaries die, a life insurance policy’s death benefit will go to the policyholder’s estate.

What is a contingent beneficiary?

A contingent beneficiary is the person who gets the death benefit if the primary beneficiary can’t receive the payout.  

For example, if your primary beneficiary dies before receiving the death benefit or if the life insurance company can’t locate them, you’ll hopefully have a contingent beneficiary listed on the policy to get the money. 

In rare cases, a primary beneficiary might flat-out refuse to accept the death benefit. 

How contingent beneficiary assignments work?

The contingent beneficiary is a backup recipient if the primary beneficiary can’t receive the death benefit. If the primary beneficiary is available to receive the benefit, then the contingent beneficiary won’t receive anything. 

If you want more than one person to split the benefit, you should name more than one primary beneficiary. You can then decide which percentage of the death benefit each of your primary beneficiaries will receive.

Do you need a contingent beneficiary?

You’re not required to name a contingent beneficiary on your life insurance policy. But that doesn’t mean you shouldn’t name one. 

If you don’t name a contingent beneficiary and your primary beneficiary dies or is otherwise unable or unwilling to accept the death benefit, the benefit from your policy will be paid to your estate. 

If your life insurance benefit is paid to your estate, your family may never get to use the money for a few reasons:

  • The death benefit will now be subject to estate taxes 
  • The death benefit will go through probate
  • A judge will determine where a death benefit in probate ends up 
  • Once the death benefit is paid to your estate, it’s fair game for creditors

Who should be your contingent beneficiary?

You can name whoever you want as your contingent beneficiary. Ideally, it will be someone that you’d still like to leave money to, but only if your primary beneficiary isn’t around. For example, you may want your primary beneficiary to be your spouse, and your contingent beneficiary to be someone you’d leave the custody of your children to if you both died. 

Here are some people who are often named as contingent beneficiaries:

  • An individual who would serve as the guardian to your children if you die
  • Other family members and friends
  • A charitable organization

Just remember that naming minor children as contingent beneficiaries isn’t always the best idea — they might not see the money until they are of legal age, which is usually after they actually need it.

“An insurance company will not knowingly pay insurance proceeds outright to minor children,” Thompson says. “Therefore, if a minor is named as a beneficiary, a guardian or custodian may have to be appointed by a court at the expense of the children.” 

Hopefully, your life insurance death benefit goes to the people you intended. But if your primary beneficiaries aren’t able to accept the money, you still want it to wind up in good hands. That’s  why it’s important to also designate contingent beneficiaries. 

By having backup beneficiaries on your policy, you can make sure the death benefit still protects the financial security of your loved ones. Just make sure to write a will and remember to update your primary and contingent beneficiaries with every major life event. 

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Nupur Gambhir
Managing Editor

 
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Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.