Primary vs. contingent beneficiary: What's the difference?

Your primary life insurance beneficiaries are first in line to receive your payout. Policyowners typically name their closest relatives and/or favorite organizations as their primary beneficiaries. But if all your primary beneficiaries have already died when you pass away, your designated contingent beneficiary will receive the payout instead. Just like with a primary beneficiary, you can name any person or organization as a contingent beneficiary, and you may have one or several.

Do I need a contingent beneficiary?

Naming a contingent beneficiary may not be required when you purchase life insurance, but it can help make sure someone you care about receives your death benefit in case your primary beneficiaries no longer can. Here's how the payout process would go for a policy with a contingent beneficiary versus one without.

Payout process with a contingent beneficiary

When you set contingent or secondary beneficiaries, you help the payout process move swiftly while keeping your benefit intact. Here's how the contingent beneficiary process works:

  1. When you purchase your policy, choose at least one contingent beneficiary in addition to your primary beneficiaries. Update your beneficiaries as needed while your policy is still active.
  2. When you pass away with an active policy, your insurer will reach out to the primary beneficiaries using the contact information you've provided.
  3. If the insurer can confirm that all primary beneficiaries are no longer living, the insurer will move on to contacting your contingent beneficiaries. Those living will receive your death benefit as you've instructed in your policy.

What happens if I don't have a contingent beneficiary?

If your primary beneficiaries are deceased and you have no contingent beneficiaries, your death benefit will be paid to your estate instead of to people or organizations you've selected. Your payout will then be subject to estate taxes and go through probate court for a judge to determine the recipient. Note that once your benefit is paid to your estate, it can be seized by creditors or take months to reach your heirs.

Naming a contingent beneficiary may keep your death benefit from being subject to estate taxes.

How many contingent beneficiaries do I need?

The number of beneficiaries you designate is entirely up to you. Similar to primary beneficiaries, you can choose multiple contingent beneficiaries and set a percentage or amount of your payout for each to receive. Remember, though, that contingent beneficiaries act as a backup plan for your death benefit; they only receive a payout if all primary beneficiaries are confirmed as deceased.

Who should I name as my contingent beneficiaries?

While primary beneficiaries are typically those closest to you who would be most affected by your death, such as your spouse and any dependents, contingent beneficiaries might be further removed from you. However, they should still be individuals or organizations you'd entrust with your payout.

If you don't want to leave your death benefit to family members or close friends who aren't already your primary beneficiaries, you can select one or more organizations as your secondary beneficiaries. This allows you to leave a legacy via your death benefit if your primary beneficiaries are no longer living.

Updating your contingent beneficiaries

Review your beneficiary designations throughout the entirety of your policy's term to keep both your primary and contingent beneficiaries current. After major life events, such as marriage, divorce, or the death of a loved one, check your policy to see if you want to make changes. By reviewing your beneficiaries regularly, you can help ensure a smooth payout process after your passing. Remember to notify new beneficiaries when you name them on your policy, and make sure they know who your insurer is; that way they know to claim the payout when you pass.