Primary vs contingent beneficiaries

A primary beneficiary is first in line to receive the death benefit. A contingent (secondary) beneficiary is paid only if every primary beneficiary has died, or cannot or will not accept the money. Naming both is the simplest way to make sure the benefit goes where you intended instead of landing in probate.

How the two levels work

The insurer pays the primary beneficiary or beneficiaries in the shares you set. It looks to the contingent beneficiary only if no primary beneficiary survives the insured, or if a primary beneficiary disclaims (refuses) the money. A contingent beneficiary has no rights while any primary beneficiary is alive and gets nothing "in addition."

Most designations are revocable, which means the owner can change them at any time without anyone's consent. See how to change your life insurance beneficiary and owner, insured, beneficiary: the parts of a life insurance policy for who has that power.

Multiple beneficiaries and shares

You can name several people at each level. Each level has its own 100%:

• Primary: spouse 60%, daughter 20%, son 20%.
• Contingent: a trust for the two children, 100%.

If the shares do not add up to 100%, or the form says only "my children," the insurer may hold the claim until the ambiguity is resolved, which can lead to a court filing. See life insurance beneficiary disputes and interpleader.

Two other choices matter when you name several primaries:

1. What if one dies first? "Per stirpes" passes that person's share to their descendants. "Per capita" (or "survivors") divides it among the remaining named beneficiaries. See per stirpes vs per capita beneficiary designations and try the per stirpes vs per capita calculator.
2. Is anyone paid in order rather than together? Some forms allow successive or "first, then second" structures. Not every insurer's form does, so ask what options its form offers.

A hypothetical example

Say a policy lists the insured's spouse as primary (100%) and the insured's two children as contingent (50% each). Three things can happen:

• Spouse survives the insured: the spouse receives all of it. The children receive nothing, even though they are named.
• Spouse dies first: the children each receive half.
• Spouse and one child die before the insured: the surviving child receives half, and what happens to the other half depends on the per stirpes or per capita instruction. If there is none, the form's default rule or the insurer's policy terms apply, so check what the contract says.

If the surviving child is a minor, the insurer will not pay the child directly. See naming a minor child as life insurance beneficiary.

What happens if no one on the list can be paid

If every primary and contingent beneficiary has died, or none was named, the policy terms decide. Many policies pay the owner's or insured's estate, or follow a default order such as spouse, then children, then parents, then siblings. That sends the money through probate and exposes it to the estate's creditors. See what happens if no beneficiary is named, what happens if your beneficiary dies before you and why naming your estate as beneficiary is usually a mistake. Naming a contingent beneficiary, and a second contingent if you wish, avoids this.

When a primary beneficiary steps aside

A primary beneficiary can sometimes refuse the money in writing, which lawyers call a disclaimer. When that happens, the benefit is treated as though that person died before the insured and moves to the contingent line or to their descendants, depending on the instruction. People disclaim for tax or planning reasons, for example to let money pass to children when a spouse does not need it. Disclaimers have strict timing and form rules under federal and state law, usually including a deadline of nine months after death and a rule against having accepted the benefit first, so a beneficiary considering one should talk to an estate attorney before cashing anything.

A beneficiary who is alive but incapacitated is a different problem. The insurer will not pay someone who cannot manage the money without a court-appointed conservator or an agent holding valid authority, which is another reason a trust can be the cleaner contingent choice.

Common mistakes

• Leaving the contingent line blank. Many people name a spouse and nothing else.
• Naming minors outright as contingent beneficiaries. Use a trust or custodian.
• Forgetting the policy after life changes. Divorce, remarriage or a new baby makes the old form wrong. Some states cancel an ex-spouse's designation after divorce, but you should not rely on that; see divorce and your ex as beneficiary: revocation-on-divorce laws.
• Mismatched names. Nicknames, missing middle names or changed surnames slow claims.
• Treating your will as the answer. The beneficiary form generally controls, as life insurance and your will explains.

Checklist

1. Confirm a primary beneficiary and percentages totaling 100%.
2. Name at least one contingent beneficiary, also totaling 100%.
3. Decide per stirpes or per capita at each level.
4. Use a trust or custodian for anyone under 18.
5. Check the same on every policy, including group life insurance at work and any annuity.
6. Review after each major life event and file the insurer's confirmation.

Key takeaways

• The primary beneficiary is paid first; the contingent beneficiary is only the backup.
• Each level should add to 100%, and each should be named with full legal names.
• Always name a contingent beneficiary, or a death of the primary can send the money to probate.
• Say what happens to a deceased beneficiary's share: per stirpes or per capita.
• Review your designations after marriage, divorce, births and deaths.