A contingent (secondary) beneficiary receives the death proceeds when:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The contingent beneficiary is the backup: he or she receives the death proceeds only if the primary beneficiary dies before the insured, disclaims the benefit, or is otherwise disqualified at the insured's death. Naming a contingent beneficiary is important because it prevents the proceeds from falling into the insured's estate and going through probate if the primary cannot take. Multiple contingent beneficiaries may be named, and beneficiaries of the same class may share the proceeds by percentage. The contingent designation takes effect automatically according to the policy's order of priority.
Why the other options are wrong
- B) Lapse and reinstatement affect whether the policy is in force, not who receives the proceeds. The order of priority among beneficiaries is unrelated to lapse.
- C) A maturity value under an endowment-type policy is payable to the owner, not to the contingent beneficiary.
- D) Accelerated death benefits are living benefits paid to the owner or insured. They do not go to a contingent beneficiary.
Memory hook
Contingent equals plan B standing quietly behind the primary.