What Is The Difference Between Primary And Contingent On Life Insurance?
When you sign up for a life insurance policy, you are asked to name a beneficiary who will receive the proceeds of the policy when you die. You have the option to name both primary and contingent beneficiaries. Here’s what you need to know about the difference between them:
|Primary Beneficiary||Contingent Beneficiary|
|The person or entity who has the first claim to inherit your assets after your death.||The second in line to inherit your assets, only if the primary beneficiary or beneficiaries have predeceased you or otherwise can’t be found.|
|You can name more than one primary beneficiary and designate how the assets will be divided among them.||If you name more than one contingent beneficiary, they will split the assets equally.|
It’s important to note that beneficiaries don’t have any legal rights to your assets during your lifetime, and you can adjust and change the designations on your life insurance policies as often as you want, as long as the account is not irrevocable. If you have a minor child as a beneficiary, the assets will go to a legal guardian until the child reaches the age of majority. Pets cannot be named as beneficiaries, but you can take care of them under your last will or living trust.
It’s also crucial to regularly review your estate plan and beneficiary designations to make sure they still communicate what you want to happen to your assets upon your death. Whenever you or your loved ones experience a life event or change, such as a birth, marriage, divorce, or death, you should revisit your will, trusts, life insurance policies, and retirement accounts to ensure you have named your chosen beneficiaries, both primary and contingent.
Consulting a legal or tax professional can help you determine the most advantageous way to arrange your affairs and avoid common mistakes when naming beneficiaries. With careful planning and regular review, you can rest easy knowing that your estate will be handled with ease once you’re gone.
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