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The primary beneficiary is the person or entity you select to receive your life insurance benefit. You can name one primary beneficiary or choose to split the money between several primary beneficiaries and stipulate a percentage for each.
The contingent beneficiary is the person or entity who receives your benefit if the primary beneficiary is dead or missing, refuses the benefit or has been declared legally incompetent. As with the primary beneficiary, you can have one or multiple contingent beneficiaries.
It’s a good idea to have at least one contingent beneficiary. If you don’t choose a contingent, and the primary beneficiary can’t accept the benefit, the money is paid to your estate.
Once the money is in your estate, it’s subject to a lengthy court process called probate — which means a judge decides who gets your payout.
The main rule is that your primary beneficiary must be legally competent to receive the benefit, but beyond that, you have many options.
When choosing primary and contingent beneficiaries, keep the following tips in mind:
Choosing the right primary beneficiaries can determine whether your family is taken care of in line with your wishes. It’s equally important to have a trusted back-up beneficiary in place, to ensure your death benefit goes to the people who need it most without being delayed by probate.
If you’re shopping around for a life insurance policy, take the time to compare life insurance companies.
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There are two main features of permanent life insurance, but using one can affect the other.
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An award-winning advocate for ethical financial planning, Cheng has been helping Americans meet their life goals for over 20 years.
Licensed in five states, Flueckiger holds one of the premier professional designations in the insurance industry.