Your life insurance beneficiaries are the people who receive your death benefit in the event of your passing. This death benefit offers substantial financial assistance, replacing your income and helping to pay off debts.

But keep in mind that beneficiaries might pass away or become unable to receive the death benefit before you die. To ensure your wishes are met, you should also consider naming contingent beneficiaries. Let's dive deeper into primary vs. contingent beneficiaries and cover why it's important to add contingent beneficiaries to your life insurance policy.

Primary vs. contingent beneficiaries: what's the difference?

Primary beneficiaries are the parties who will receive your death benefit if you pass away while your life insurance is in force. Many people name family, such as their spouse, as the primary beneficiary. However, you can also name charitable organizations, estates, businesses, and trusts as beneficiaries.

Contingent beneficiaries are essentially backup beneficiaries. They receive the benefits if a primary beneficiary becomes unable to. For instance, if a primary beneficiary dies before you do, a contingent beneficiary may receive their share of the payout instead.

Many people name close friends or extended family members as contingent beneficiaries. Once again, you can name charities, estates, businesses, and trusts. Contingent beneficiaries can also be people who receive the death benefit on certain conditions, such as an adult child graduating college.

Reasons to add contingent beneficiaries

Contingent beneficiaries can ensure your life insurance wishes are met. Here are some benefits of naming contingent beneficiaries:

1. Your death benefit will go to someone you care about no matter what happens

People primarily set up contingent beneficiaries so that another trusted individual or organization gets their death benefit if a primary beneficiary becomes unable to, either through death or ineligibility. This can help ensure your death benefit goes to someone you care about.

2. You want to provide for your children

Life insurance can be an excellent tool to provide for your children if you die unexpectedly, but in most cases, you can't name a child as a beneficiary while they're a minor. Many people will name their spouse as the beneficiary in this case.

But if your spouse passes away before you, you can set up a trust as a contingent beneficiary. The trust will manage the assets until your child reaches the age of majority before paying them out to your child.

3. You want certain conditions to be met

You can also set contingent benefits based on certain conditions being met. For instance, if you want to make sure your child is financially ready to start a family, you could name them a contingent beneficiary, with the death benefit paying out to them when they get married.

Protect your wishes with contingent beneficiaries

Life insurance can be a vital investment for passing down your wealth and protecting your loved ones when you pass away. But remember that the unexpected can happen. Naming contingent beneficiaries can ensure your wishes are met if a primary beneficiary becomes unable to receive the death benefit while avoiding the costs and pains of court.

With that in mind, make sure you update your primary and contingent beneficiaries whenever life situation changes affect your beneficiaries. That will help you stay prepared for anything.

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