California Life-Only & Accident and Health AgentLife InsuranceMedium
An individual purchases a life insurance policy and names their spouse as the primary beneficiary. They later decide they want to ensure that if their spouse predeceases them, their adult child will receive the death benefit without needing to update the policy again. However, they also want to retain the right to change the beneficiary at any time. What type of beneficiary designation should the individual use for their adult child?
- AContingent Beneficiary
- BRevocable Primary Beneficiary
- CIrrevocable Beneficiary
- DPer Stirpes Beneficiary
Show answer & explanationAnswer & explanation
Correct answer: A. Contingent Beneficiary
A contingent beneficiary is designated to receive the death benefit if the primary beneficiary dies before the insured. This setup allows the policyowner to retain the right to change beneficiaries (as opposed to an irrevocable designation) while ensuring a backup recipient.
Why the other options are wrong
- B. The spouse is already the primary beneficiary. The question is about the *next* in line if the primary is gone.
- C. An irrevocable beneficiary cannot be changed without their consent, which contradicts the client's desire to retain the right to change beneficiaries.
- D. Per Stirpes is a method of distributing proceeds among heirs (by representation) if a beneficiary dies, but it's not a type of beneficiary designation itself in this context of primary/contingent.
Contingent Beneficiary
The secondary beneficiary designated to receive the death benefit from a life insurance policy if the primary beneficiary is deceased at the time of the insured's death.
- Receives proceeds if primary beneficiary is not alive
- Acts as a backup
- Policyowner can typically change contingent beneficiary
Memory trick: Primary first, Contingent second, Irrevocable stuck.