The question of who should receive the death benefit from your policy may be an easy one, but figuring out contingent beneficiaries may be a trickier decision. Contingent beneficiaries are essentially second in line to receive your life insurance benefits. They can be another family member, friend, or even a charitable organization that will receive your benefits if your primary beneficiary passes away or refuses the payout.

Reasons to designate a contingent beneficiary

A contingent beneficiary is a backup to the primary beneficiaries named in your life insurance policy. Contingent beneficiaries receive the death benefit if the primary beneficiary passes away or refuses the payout. It’s best practice to designate one or more contingent beneficiaries with any life insurance plan, and it can be particularly important with permanent life insurance, such as whole life insurance or universal life insurance. With lifelong coverage, not only are your priorities likely to change several times while you have the policy, but there’s a larger chance that one of the beneficiaries might pass away.

What happens if you don’t designate contingent beneficiaries? Simply put, if you don’t designate a contingent beneficiary, your life insurance plan may not benefit anyone in the way you hoped. Without a contingent beneficiary in place, if the primary beneficiary passes away or refuses the death benefit, your insurance payout could end up in probate court, which is the entity that deals with estates and debts upon someone’s death.

Does designating a contingent beneficiary affect the primary beneficiary?

A contingent beneficiary receives the death benefit only if the primary beneficiary passes away before you do or refuses the payout. Designating a contingent beneficiary will not affect the primary beneficiary’s payout. Contingency designations only come into play when the primary beneficiary is unavailable for some reason. For instance, if you choose your spouse as the primary beneficiary but they pass away before you, your child would receive the insurance benefits as the contingent beneficiary.

How do I designate a contingent beneficiary?

Like primary beneficiaries, you can choose multiple contingent beneficiaries. You can do this through your insurance provider or agent, and you may even be able to update this information online. Remember to update your policy whenever you want to change beneficiaries, including selecting or changing contingent beneficiaries. Many people choose to do this after major life events such as marriage, divorce, becoming a parent, or the death of a loved one.

What if there’s no one I want to designate as a contingent beneficiary?

What if you can’t think of anyone to designate as a contingent beneficiary? If you don’t have anyone in mind, you might decide to make a charity or multiple charities your contingent beneficiaries. This ensures that, if your beneficiaries are no longer living, the death benefit will go to a cause you care about.