Who is Contingent Beneficiary and what its role in life insurance contract? Life insurance is basically contract between policy holder and insurance company.
It states as long as premiums are paid as originally agree upon. Insured person dies during the term of coverage, dollar amount of the coverage is paid to the holder’s named beneficiary. But what happens if the name beneficiary is no longer alive at the time of the policy holder’s death? Common selections when first getting a term life insurance quote regarding the life of the policy. These are 5 year, 10 year, 15 year, 20 year, 25 year and 30 year term. When the applicant chooses the coverage amount and selects term of policy. Need for a contingent beneficiary doesn’t seem important or likely to be necessary. Applicant is assuming he or she will die before the named beneficiary is person most loved by the person.
Why contingent beneficiary is necessary?
No one wants to imagine having to endure witnessing the person most cherished. Who is the reason for getting a life insurance quote and policy in the first place, die first. Policy will be in force for up to 30 years and insurance is being purchased because death is not predictable. The same holds true for the named beneficiary. Death is unpredictable for that person also. By definition, the contingent beneficiary is person or persons name to receive proceeds in case original beneficiary is not alive. This is also refer to as the secondary or tertiary beneficiary. It is common sense to select an alternate beneficiary at the site of procuring term life insurance. There is no downside to doing so and it removes possibility of having no named beneficiary due to poor planning. It is very important to have proper plan for you and your family future.
The contingent beneficiary is your second option to collect the insurance benefits of your policy when you die. Whoever you include in your list as contingent beneficiary will only obtain the policy’s death benefits. If all your primary recipients are dead or not entitle to acquire the life insurance benefits. The more names you include in the list of primary beneficiaries. There are lesser the chance that the contingent beneficiaries get a fraction of the proceeds. Contingent recipients have no right to collect the proceeds of a policy unless the primary beneficiaries pass away. It is prior to the death of the policy owner. Many individuals designate their spouse as the primary beneficiary and their children as contingent beneficiaries. There are two problems here. First, the spouse is the primary beneficiary and second the children are the contingent beneficiaries.
The thought is, if the husband or wife were to die the money will be passed onto the spouse. If the husband and wife die simultaneously, the benefits will be pass on to the children. It helps to get easy claim otherwise there is nothing which you can do to get money.