Primary vs. Contingent Beneficiary: What’s the Difference?

Shawn Plummer

CEO, The Annuity Expert

What is a Contingent Beneficiary?

A contingent beneficiary is a secondary or backup beneficiary who receives the benefits of a policy, like a life insurance policy, if the primary beneficiary is unable to do so. This usually happens if the primary beneficiary predeceases the policyholder or is unable to meet the requirements set forth in the policy.

Difference Between Primary and Contingent Beneficiary

  1. Priority: The primary beneficiary is the first in line to receive benefits, while the contingent beneficiary is next in line if the primary is unavailable.
  2. Conditions for Receiving Benefits: The contingent beneficiary only receives benefits under specific conditions, primarily the inability of the primary beneficiary to claim them.

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Contingent Beneficiary

How Would a Contingent Beneficiary Receive the Policy?

A contingent beneficiary would receive the policy benefits under the following circumstances:

  • Death of Primary Beneficiary: If the primary beneficiary dies before the policyholder or before claiming the benefits.
  • Ineligibility of Primary Beneficiary: If the primary beneficiary cannot legally receive the benefits or fails to meet specific policy criteria.
  • Refusal by Primary Beneficiary: If the primary beneficiary chooses not to accept the benefits.

Comparison of Primary and Contingent Beneficiaries

FeaturePrimary BeneficiaryContingent Beneficiary
PriorityFirst in lineSecond in line
Condition for Receiving BenefitsDefault recipientReceives benefits if the primary is unable to
Dependence on Policyholder’s StatusIndependent of policyholder’s statusDependent on primary beneficiary’s status

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What Is A Contingent Beneficiary

Conclusion

Understanding the difference between primary and contingent beneficiaries ensures that the benefits of policies like life insurance are appropriately allocated. While the primary beneficiary is the first choice, the contingent beneficiary plays a vital backup role. Knowing these roles helps in effectively planning for future uncertainties.

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Frequently Asked Questions

What is a primary beneficiary?

A primary beneficiary is a person or entity first in line to receive benefits from a policy, plan, or estate. The primary beneficiary has precedence over all other beneficiaries.

What is a contingent beneficiary?

A contingent beneficiary is a person or entity next in line to receive benefits from a policy, plan, or estate if the primary beneficiary dies or is otherwise unable to collect. The contingent beneficiary only receives benefits if the primary beneficiary cannot.

What are the rights of a beneficiary?

Beneficiaries have the right to information about the policy, plan, or estate they receive benefits. They also have the right to change their status as a beneficiary and waive their rights.

What does contingent mean by life insurance?

“Contingent” in life insurance refers to a secondary or backup beneficiary named in a life insurance policy. A contingent beneficiary is only eligible to receive the death benefit if the primary or named beneficiary is not alive or unable to receive the death benefit for any other reason. Having a contingent beneficiary is essential to ensure that the death benefit will be received by someone in case the primary beneficiary cannot accept it. It bears noting that the grant of funds will only go to this secondary recipient if there is no other alternative for the principal one.

*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost to you if you purchase a policy. It helps us keep the lights on!

Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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