When taking out a life insurance policy, the policyholder must name one or more “beneficiaries” who will receive the death benefit if the insured passes away while covered by the policy. Policyholders have multiple options for choosing beneficiaries:
Primary and contingent beneficiaries
The “primary beneficiary” on a life insurance policy is the first in line to receive the death benefit. A “contingent beneficiary” or “secondary beneficiary” may receive the death benefit in place of the primary beneficiary if specific, predetermined provisions are satisfied. In most cases, a contingent beneficiary will only receive the death benefit if the primary beneficiary is deceased or unreachable. For policyholders, listing a contingent or secondary beneficiary can act as a safeguard in case something happens to the primary beneficiary (see our previous blog post).
If the policyholder would like to name multiple beneficiaries to a single policy, he or she can specify any number of “co-beneficiaries.” When multiple beneficiaries are listed, insurance companies can split the same death benefit amongst them. Policyholders may specify who receives what percentage of the death benefit, or they may request that it be distributed evenly.
It is possible to designate multiple primary co-beneficiaries, as well as multiple contingent co-beneficiaries. For policies with multiple primary beneficiaries, the contingent beneficiary or beneficiaries will likely only receive the death benefit if none of the primary beneficiaries are reachable. If this happens to be the case, each contingent beneficiary will receive their designated portion of the death benefit.
However, legal debates frequently arise when multiple parties claim to be the validly named beneficiary to a life insurance policy (see our previous blog post). If you were the beneficiary to a life insurance policy yet your claim was unlawfully denied, don’t hesitate to contact an experienced life insurance lawyer.