What Is a Contingent Beneficiary?

Updated · Jun 01, 2022

When you buy life insurance, you choose a beneficiary—the person who will receive the benefit upon your death.

But what if something happens to them first?

Who will get the benefit?

To make sure your inheritance doesn’t fall into the wrong hands, you need to name a contingent beneficiary.

Read on to learn who you can choose and how.

But first, let’s see ​​what a contingent beneficiary is.

What Is Contingent Beneficiary

Simply put, this is the alternative heir of the benefits in a will, trust, or insurance if the primary recipient cannot receive them.

The meaning of contingent is “existing only if certain conditions are met.” In the case of inheritance, the condition is the death or another circumstance permanently impeding the primary beneficiary from receiving the assets.

The meaning of contingent beneficiary in life insurance is the same. Only in this situation, the asset is the death benefit.

Primary vs. Contingent Beneficiary

The meaning of primary beneficiary is a person or entity you choose as a recipient of your assets upon your death.

If they die before you do, the second in line will receive your inheritance.

Naming both primary and contingent beneficiaries can help individuals avoid potential probate battles among family members.

What is probate?

It’s the legal process of dealing with the financial affairs of a deceased person. If there is no named beneficiary or they are unable or unwilling to serve, the court will distribute the assets.

That can be a time-consuming and expensive process. Worse yet, your inheritance might end up with the state or someone you wouldn’t like to have it.

To avoid that, some people even name a final or tertiary beneficiary.

How Contingent Beneficiary Assignment Works

Now that you know what a contingent beneficiary is, let’s explain how to choose one.

The process is simple.

First, you need to decide who you want as a backup beneficiary. Most people choose their spouse as a primary and their children—as a secondary recipient.

Then, fill out the details of the beneficiaries.

Typically, that happens when you purchase life insurance. But if you haven't done it, contact your provider and ask what the procedure is.

Most companies only need the full legal name of the contingent beneficiary and their relationship to you.

That said, some might ask for their address or Social Security number. So, make sure you have those just in case.

Usually, you can name more than one contingent and primary beneficiary. In fact, you can have a different beneficiary for each of your assets.

Finally, you can change your secondary beneficiaries at any time.

The process is the same. Just contact the insurance company and update their details.

What Happens if You Don’t Name Contingent Beneficiaries for Your Assets?

If you don't list a backup recipient, proceeds will end up in probate.

Typically, your estate will pass according to the intestacy laws of your state. In other words, your property will go to your closest relatives, regardless of your wishes.

For example, if you are unmarried and have no children, your parents will inherit your assets. If you are married, the first in line is typically your spouse.

Why Should You Name Secondary Beneficiaries?

By definition, a contingent beneficiary is a backup in case something happens to the primary recipient.

Naturally, you can get life insurance without choosing one. But while it’s optional, it can give you peace of mind.

That ensures your property will be distributed according to your wishes. What’s more, it can help avoid family conflict and any unwanted surprises.

Most importantly, having a contingent beneficiary will spare your loved ones the lengthy process of probate.

Choosing Beneficiaries

Life insurance has many benefits. You can use it to provide financial security to your family or leave an inheritance.

To take full advantage, you need to choose not only the right type of policy but the right beneficiary as well.

Most people name their spouse as a primary recipient.

But what if you’re unmarried?

Can you name a friend or another relative?

Who Can Be a Beneficiary

The beneficiary can be an individual, a charity, or even a business. You can name whoever you want as a contingent beneficiary as long as they are legally eligible to receive the inheritance.

For example, if you name a minor child, you will also have to choose a legal guardian. They will oversee the inheritance until the child reaches legal age.

There’s also another solution for that situation—you can change beneficiaries.

Changing Beneficiaries

Experts recommend reviewing your beneficiaries when there is a big change in your life. These include events like marriage, divorce, death, or birth.

You can also choose a relative or a friend as a contingent beneficiary. Then, name your children when they reach legal age.

How can you change the beneficiary?

Just contact the insurance company and provide the details of the new recipient.

Wrap Up

When it comes to estate planning and life insurance, one of the most important decisions is who you’ll name as a beneficiary.

After all, they will receive your assets after you die.

But what if something happens to them?

That’s why you need to name a contingent beneficiary. Choose a trusted person as a backup and buy yourself and your family some peace of mind.

Aleksandra Yosifova
Aleksandra Yosifova

With an eye for research, Aleksandra is determined to always get to the bottom of things. If there’s a glitch in the system, she’ll find it and make sure you know about it.