Insurance
Beneficiary
A beneficiary is a person or entity designated to receive the death benefit or proceeds from an insurance policy or retirement account.
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Exam Tip
Primary gets paid first. Contingent is backup. Irrevocable requires consent to change.
What is a Beneficiary?
A beneficiary is the person (or entity) who receives the payout when the insured person dies or when certain conditions are met. Choosing beneficiaries is one of the most important decisions in estate and insurance planning.
Types of Beneficiaries
| Type | Definition | Priority |
|---|---|---|
| Primary | First in line to receive benefits | Receives if living |
| Contingent (Secondary) | Backup if primary can't receive | Receives if primary deceased |
| Tertiary | Third in line | Receives if primary & contingent deceased |
Who Can Be a Beneficiary?
- Individuals (spouse, children, relatives, friends)
- Trusts
- Charities
- Estates
- Business entities
Revocable vs. Irrevocable
| Type | Can Be Changed? | Consent Needed? |
|---|---|---|
| Revocable | Yes, by policyholder | No |
| Irrevocable | Only with beneficiary's consent | Yes |
Per Stirpes vs. Per Capita
- Per Stirpes - If beneficiary dies, their share goes to THEIR descendants
- Per Capita - If beneficiary dies, their share is split among surviving beneficiaries