Leaving a Legacy: Reasons to Name a Contingent Beneficiary of a Life Insurance Policy

September 25, 2023

Taking out a life insurance policy or establishing a trust is a common way to ensure that your loved ones are appropriately covered and that your assets are managed accordingly.

Policyholders are often asked to name primary and secondary beneficiaries. By doing so, they can help relatives avoid unnecessary disputes and prevent the assets from going through probate upon their passing.

Assigning at least one beneficiary is a smart move. However, it can lead to sensitive discussions among the family members, residual anger, and ambiguity. Keeping a cool head is one of the most effective strategies for naming beneficiaries.

Who Is a Life Insurance Beneficiary?

Making plans for your potential death cannot be life-affirming or uplifting. But once you decide to take out life insurance, you need to stay realistic and choose people or entities you deem worthy of acquiring your estate.

There is no universal rule to this, considering and designating a beneficiary is always a unique process. Most people tend to give it a lot of thought and choose only one person worthy of receiving a death benefit. This person is also known as the primary beneficiary.

What if you have a big family? In this case, you might consider assigning both primary and secondary beneficiaries and split the contingent percentage among the latter accordingly.

If you decide to take out life insurance as a safety net for your children or grandchildren, you need to consider their age; and establish a trust fund.

Generally, it is not advisable to choose minors as death benefit recipients. Until kids come of age, they cannot own or manage the funds. Therefore, it is more reasonable to choose a children’s guardian who can also administer the estate until it is time to transfer everything into their rightful possession.

If you want to provide lasting social welfare and protection for your children, establishing a trust fund is an alternative option. In this case, you will have to name a trustee who will control and distribute the funds. But bear in mind that you need to make sure that your will is consistent with the terms of your life insurance and vice versa.

If you are only considering taking out life insurance, hesitate no longer.

The abundance of approachable life insurance products makes them more relevant and accessible for potential policyholders. Therefore, anyone can get the right insurance policy, especially if you understand your needs.

Primary vs. Contingent Beneficiaries

Full disclosure: you do not necessarily have to opt for only one type. You can assign multiple primary and secondary recipients. What is even more interesting is that the number is unlimited.

Naturally, you can name only one or two principal beneficiaries should you wish so and indicate no secondary recipients whatsoever.

In some cases, though, the primary recipient can disclaim the estate and, in a way, assist contingent beneficiaries with receiving their shares. Let’s look at the example.

Let’s say that you decided to go with per capita distribution.

This way, you name only one principal beneficiary — your spouse, who should receive 50% of the benefit. In this case, each indicated contingent beneficiary gets a share of the remaining 50%. It is up to you to distribute the respective shares.

If the spouse dies or decides to renounce the inheritance, each secondary recipient will receive the spouse’s share of the estate totaling 100%.

Alternatively, you can choose per stirpes distribution.

Let’s say that you name your two sisters Jane and Eliza as primary beneficiaries, and only Eliza has children. Unfortunately, Eliza predeceased you and Jane. In this case, her share will be equally divided among her survivors — her children.

If Jane predeceased you and Eliza, no share is created because she has no descendants. Eliza, however, will receive all the assets.

Since multiple scenarios can take place, you need to choose the appropriate distribution model and appoint the proper beneficiaries like siblings, parents, or charities, for instance.

Why Assign Contingent Beneficiaries

Determining the asset allocation is crucial if you want to ensure its protection and safety.

While the circumstances of taking out a life insurance policy may differ, the ultimate goal is often the same — secure your assets and take care of your loved ones. Therefore, taking time to consider and designate contingent beneficiaries is another way of simplifying the process if things go sideways.

If you choose to ignore the requirement to appoint the benefit recipients, your estate will have to go through the probate process. Unfortunately, it might take months because of the estate size or the complexity of the process itself.

In a nutshell, you will make yourself and your relatives a favor by naming the recipients right away.


Shopping around for life insurance is not an easy task, but a policy is designed to meet all of your needs and requirements. If you still have doubts, consider comparing inexpensive insurance quotes and assessing all the available options.

Once you find the right policy, it might be challenging to choose the benefit recipients. In this case, take your time and review all the eligible candidates.

If you are a single person with no dependents, you can appoint any charity as the beneficiary or simply keep your options open. Remember, it is entirely up to you.

Victoria Berezhetska

Victoria Berezhetska is a Content Lead at Phonexa.com and an expert contributor to CoverExplore. She has a Bachelor of Science degree in Business Administration, with extensive working experience as a PR specialist and content writer. At CoverExplore, she helps customers find the right educational material through easily digestible blog posts and buying guides backing their insurance coverage choice. Victoria covers diverse topics around digital and insurance marketing, including auto, home, health, and life insurance.


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