What Is a Life Insurance Beneficiary?

A life insurance beneficiary is the person or organization that receives a policy’s payout — or death benefit — after you pass away.

A beneficiary only receives money from a life insurance company if your policy is active at the time of your death.

Keep in mind that some states have laws regulating who you can and can’t name as a beneficiary.

You’ll need to provide the insurer with some basic information about your selected beneficiary, including their full name, birthday and Social Security number.

It’s wise to revisit your policy every few years to ensure your designations are correct and your contact information is up to date.

A primary beneficiary is the first person you want to receive the life insurance money when you die. Many people designate their spouse or partner.

A contingent, or secondary, beneficiary is the person who receives the death benefit if the primary beneficiary is deceased.

It’s important to note that a contingent beneficiary won’t receive death benefit money if any of the primary beneficiaries are still alive.

You should always name a contingent beneficiary, according to Life Happens, a nonprofit dedicated to educating consumers about the importance of life insurance.

Otherwise, leaving behind life insurance without a living beneficiary may cause money to go to someone you never intended your policy to benefit. It may also require a court-appointed administrator to sort things out.

You can select multiple primary beneficiaries and multiple contingent beneficiaries.

If you name multiple beneficiaries, you can decide how much of the payout each party receives. You can divvy up the death benefit as a percentage or as a specific dollar amount per person.

There are two types of beneficiary classes: Revocable and irrevocable beneficiaries.

With a revocable beneficiary, policy owners can change designations at any time without the consent of a previously named beneficiary.

In contrast, when someone is named as an irrevocable beneficiary, the policy owner cannot change the designation without consent from the original beneficiary.

In other words, the entitlements of an irrevocable beneficiary are guaranteed.

Children are often named as irrevocable beneficiaries. A court can also order someone to purchase a life insurance policy and designate an ex-spouse as an irrevocable beneficiary in order to cover child support or alimony payments.

Selecting beneficiaries is an important decision. The life insurance money they receive can help cover your loss of income, pay for funeral arrangements or finance a college education.

However, simple mistakes can complicate your good intentions.