Primary and contingent beneficiaries

Where beneficiaries fit in a health policy

Most health insurance benefits are paid to the insured (or, by assignment, straight to the doctor or hospital). The exception is money payable because the insured died: an accidental death and dismemberment (AD&D) benefit, an accidental death benefit in an accident policy, or life coverage bundled into a group health plan. That money cannot go to the insured, so the policy names a beneficiary to receive it. The policyowner chooses the beneficiaries, and the uniform payment-of-claims provision says death benefits go to the named beneficiary; if there is none, they go to the insured's estate.

Primary beneficiaries

The primary beneficiary is first in line. If the primary is alive when the insured dies, the primary collects and nobody further down the list receives anything. An owner can name more than one primary and set their shares, such as "my spouse 60% and my brother 40%," or split equally if no shares are stated.

Contingent beneficiaries

The contingent (secondary) beneficiary collects only if every primary beneficiary has died before the insured, or is otherwise unable to take. A contingent is a back-up, not a co-owner of the benefit: while any primary survives, the contingent gets nothing. Some owners also name a tertiary beneficiary as a third level.

If no named beneficiary at any level survives, the proceeds go to the insured's estate. That works, but estate money may pass through probate, may be reached by the insured's creditors, and is delayed. Naming a contingent is how an owner avoids that.

A flowchart shaped like a ladder showing who collects a death benefit. At the top, the insured dies. The first step asks whether any primary beneficiary is alive. If yes, the primaries are paid and the process stops. If no, the chart steps down to the second level and asks whether any contingent beneficiary is alive. If yes, the contingents are paid and it stops. If no, it steps down to a third, tertiary level, if one was named, with the same question. If no one at any level is alive, the money goes to the insured's estate, shown at the bottom with a warning about probate delay and creditor claims. A note at the bottom says a lower level is paid only if no one on every higher level survives. — The payout ladder: each level collects only if no one above it survives the insured.

When a beneficiary dies first

Per capita ("by the head"): the benefit is split equally among the named beneficiaries

who are still alive. A deceased beneficiary's share goes to the surviving ones.

Per stirpes ("by the branch"): a deceased beneficiary's share passes down to **that

person's descendants**, such as their children.

Revocable and irrevocable

A revocable beneficiary can be changed by the policyowner at any time, without the beneficiary's knowledge or consent. An irrevocable beneficiary has a vested interest: the owner needs that beneficiary's written consent to change the designation, or to take actions that reduce what the beneficiary would receive, such as an assignment.

Deaths in a common disaster

If the insured and the primary beneficiary die in the same accident and nobody can tell who died first, the law generally presumes the insured survived, so the benefit goes to the contingent rather than to the primary's estate. Many policies add a common disaster (survivorship) clause requiring the primary to outlive the insured by a stated period, such as 30 days, before the primary is entitled to collect.

Other designations to know

Class designations name a group, such as "my children," instead of individuals.
Minors cannot sign for the money themselves, so the insurer will usually pay a

court-appointed guardian or a trustee, which is why owners often name a trust for children.

The owner can name the estate or a trust directly.