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  • Writer's picturejimmy ting

Life Insurance - What is a Primary Beneficiary?

Time for a little word play. The word beneficiary has its roots in the Latin benefactum, meaning good deed. And that’s a good way to think of naming someone, or someones, or something, as a beneficiary on your term life insurance policy. Simply put, a life insurance beneficiary is the person who will receive a policy payout (called a death benefit) if you were to die with coverage in place. It can be a person, multiple persons, a trust, or even an organization — or some combination depending on your needs.

But what distinguishes a primary beneficiary from all others (like a contingent beneficiary)? And how do you choose that primary beneficiary, anyway? These are important questions — arguably the most important questions you’ll face when buying a life insurance policy. After all, why are you getting the policy in the first place? To help financially protect those you love in case you’re not around to do so yourself. (That’s that good deed we were talking about earlier.)

With all that in mind, here’s what to consider, and what you need to know, when choosing who to name as your primary beneficiary on your life insurance policy.

What is a beneficiary?

Again, a life insurance beneficiary is a person who will receive the payout from a policy if you were to die. The proceeds from the payout, known as a death benefit, can be used to help pay for your beneficiary’s financial needs, both those that come with death (funeral arrangements, burial expenses) and those that we have in daily life (mortgage payments, child care). Because you might not want to put all your financial eggs in one person’s basket, you can name two (or more) people as beneficiaries, outlining the percentage of the policy payout each would be given by the life insurance company.

What is a primary beneficiary, anyway?

A primary beneficiary is a designated individual, chosen by the policyholder, who would receive the proceeds of the policy if he or she were to die. When selecting a primary beneficiary, you can name a person or persons or even a revocable trust (or living trust) or other legal entity. Most importantly, the primary beneficiary is the “first in line” to receive the death benefit.

For some, designating two primary beneficiaries — say, a spouse or partner and a parent — may make sense, especially if both could face financial hardship. For others, one primary life insurance beneficiary, with a contingent beneficiary named, makes the most sense. The latter is what we commonly see, where most customers name their partner as the sole primary beneficiary.

Keep in mind that your primary beneficiary must be legally competent to accept the proceeds. This raises the question of whether it is possible to name minors as primary beneficiaries. The short answer is yes, as long as certain steps are taken — specifically, naming a guardian who will oversee your trust to ensure your estate is executed in accordance with your wishes.

Whomever you choose, you’ll want to make sure you notify your beneficiary (or beneficiaries) that you’ve designated them. This will ensure they know your wishes, and can act accordingly in the event something happens to you. Also, keep in mind that, with most life insurance policies, you can change your beneficiary designation at any time.

What is a contingent beneficiary, and why would I need one?

A contingent beneficiary is who would receive the death benefit if something happened to the primary beneficiary. After all, life is full of unexpected outcomes. Selecting a contingent beneficiary is a prudent way to protect yourself and your loved ones from a number of “what-if scenarios,” such as your primary beneficiary not being alive at the time a claim is made. It’s common for policyholders to name their spouse or partner as the primary beneficiary and then their children or their children’s guardian as the contingent, for example. That way, if anything happened to both parents, the proceeds would go to the children or their guardian to manage.

Listing a contingent beneficiary will make life less hard for that person. Basically, if something happens to you and your primary beneficiary, your death benefit would be paid to your estate if you hadn’t named a contingent beneficiary. It might then be subject to distribution through the probate court which will cause a delay in disbursing money — a complicated situation for your loved during an already stressful time. (Note: If you’ve already set up a living trust and plan to name it as the primary life insurance beneficiary this might not be an issue.)

And FYI: You can have more than one primary beneficiary and more than one contingent beneficiary; you simply need to designate what percentage of your life insurance proceeds you want to allocate to each of your primary beneficiaries. And again, insurance companies will let you change your beneficiary designation at any time.

Additional “just in case” scenarios where a contingent beneficiary would be needed:

  • Primary beneficiary cannot be found

  • Primary beneficiary refuses to accept the proceeds

  • Primary beneficiary has predeceased the policyholder

For more information about Life Insurance call JCT Insurance Agency at (626)354-2000 or email

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