California Life-Only & Accident and Health AgentLife InsuranceMedium
A life insurance policyowner has designated their spouse as the primary beneficiary and their two children as contingent beneficiaries, with each child receiving an equal share. If the policyowner and their spouse die simultaneously in an accident, and the children are alive, how will the death benefit be distributed?
- AThe entire death benefit will go to the policyowner's estate, as the primary beneficiary is deceased.
- BThe death benefit will be paid to the spouse's estate, as they were the primary beneficiary.
- CThe death benefit will be split equally between the two children.
- DThe insurer will determine the distribution based on state intestacy laws.
Show answer & explanationAnswer & explanation
Correct answer: C. The death benefit will be split equally between the two children.
When the primary beneficiary dies before or simultaneously with the insured, the death benefit passes to the contingent beneficiaries. In this case, the two children, as contingent beneficiaries, will equally share the death benefit.
Why the other options are wrong
- A. The estate is only involved if no beneficiaries (primary or contingent) are alive.
- B. A beneficiary must be alive to receive the benefit, so the spouse's estate would not receive it.
- D. Intestacy laws apply only if no valid beneficiaries are named or alive.
Contingent Beneficiary
An individual or entity designated to receive the death benefit of a life insurance policy if the primary beneficiary is deceased at the time of the insured's death.
- Receives benefit if primary is deceased
- Second in line for proceeds
- Ensures benefit distribution even if primary cannot receive
- Can be multiple contingent beneficiaries
Memory trick: Beneficiaries are the 'heirs to the treasure chest' of your policy.