What is the difference between primary and contingent beneficiaries?

Answer 1

When one buys a life insurance policy, one must identify the person (or persons) to whom the proceeds will be paid upon the death of the insured. This is known as the Primary Beneficiary. One may also choose to name a "Contingent" (or secondary) Beneficiary, to whom the proceeds would be paid in the event that the Primary is unavailable (die to, for example, pre-deceasing the insured). Not everyone chooses to name a Contingent Beneficiary: in its absence, and if the Primary is unavailable, then the proceeds are generally payable tot he estate of the insured. It's worth noting that the beneficiary doesn't have to be a person: many people set up trusts specifically for this purpose. These are called "inter-vivos" or "life insurance" trusts. They are often used when the proposed beneficiaries are minors, or for estate preservation reasons.