Your beneficiary is the person or entity who receives the death benefit. It is one of the most important choices in a policy, and one of the most commonly overlooked after the policy is issued. Getting it right, and keeping it current, helps your money reach the people you intend quickly.
Primary vs. contingent beneficiaries
- A primary beneficiary is first in line to receive the benefit.
- A contingent (or secondary) beneficiary receives it if the primary cannot, for example if they pass away first.
- You can name more than one and split the benefit by percentage.
Common mistakes to avoid
- Naming a minor child directly, which can complicate how funds are handled.
- Forgetting to update after a marriage, divorce, or death in the family.
- Leaving the beneficiary blank, which can send the benefit through the estate.
- Assuming a will overrides the beneficiary designation; usually it does not.
The beneficiary form usually wins
For life insurance, the beneficiary you name on the policy generally controls who receives the money, even if your will says something different. That is why reviewing designations after big life events matters.
When to review your beneficiaries
A good habit is to review beneficiaries after any major life change, and every few years otherwise. It takes only a few minutes and can prevent painful complications later.