When purchasing life insurance, it’s usually standard practice to name beneficiaries. When naming beneficiaries, some people neglect to name contingent beneficiaries. If you aren’t sure whether contingent beneficiaries are listed on your life policy, here’s why you should ask your South Burlington, Vermont insurance agent.
Residents of South Burlington, VT: If Your Beneficiary Passed Away, Who Would Receive Your Life Insurance Benefits?
Beneficiaries Receive a Life Insurance Policy’s Death Benefits
The beneficiaries of a life insurance policy are the people who will receive the policy’s death benefits if the policyholder passes away from a covered cause. A policy’s beneficiaries are typically listed when the policy is purchased. This can usually be changed by filing a form with an insurance agent or company.
A policy may have one or many beneficiaries, and they can be almost anyone or any organization. In most cases, dependents, family members, other individuals, organizations, or businesses can be named beneficiaries.
There Are Primary and Contingent Beneficiaries
Beneficiaries can be categorized into two groups: primary beneficiaries and contingent ones.
Most of the time, death benefits are distributed to primary beneficiaries (according to the terms stated in a policy). That’s why they’re referred to as “primary.”
Contingent beneficiaries are just that. They’re included in case something happens to the primary beneficiaries. Typically, death benefits will only be distributed to contingent beneficiaries if all primary ones are deceased.
In other words, contingent beneficiaries fill in for primary beneficiaries if the primary beneficiaries pass away before the policyholder.
Without Contingent Beneficiaries, Problems Can Arise
If no contingent beneficiaries are named and the primary beneficiaries pass away before the policyholder, a couple of issues can arise.
First, it can take time to sort out who the benefits should go to if there are no surviving primary beneficiaries. Going through the legal process of determining who should receive the benefits can take time, and it may be especially drawn out if there’s a dispute over who should get them. The benefits may be tied up in probate, and lawsuits filed by different parties can make the process take months (if not longer).
Second, benefits may not be distributed according to the policyholder’s wishes. Vermont’s legal process may direct the benefits to a different beneficiary than the policyholder would like. After all, the law is sometimes blind to people’s wishes unless they stipulate their wishes in a proper legal manner.
Naming contingent beneficiaries is a recognized way to state who should receive a life policy’s benefits should the primary beneficiaries pass away before the policyholder, and doing so can help avoid both of these issues.
If Family Members Are Beneficiaries, Contingent Beneficiaries Are Especially Important
Often, naming contingent beneficiaries is especially important because the primary beneficiaries are people close to the policyholder. While pretty much anyone or any organization can be a beneficiary, most people name individuals who are close to them. Family members, for example, are frequently listed on policies as primary beneficiaries.
When South Burlington, VT residents name beneficiaries who are close them, there’s a chance both the policyholder and beneficiaries may pass away in the same accident -- sometimes with the beneficiary passing away first and the policyholder following shortly thereafter. After all, family members spend a lot of time together, and an accident may cause the death of several family members. This, in turn, could leave a life policy that doesn’t have contingent beneficiaries without any surviving beneficiaries listed.
Check or Add Contingent Beneficiaries by Contacting Your South Burlington, VT Agent
To check whether your life insurance policy has contingent beneficiaries listed, contact your independent South Burlington, VT insurance agent. They’ll be able to check for you, and they can help you add contingent beneficiaries if you need to. Adding contingent beneficiaries is usually free and, with the help of an agent, is typically as easy as filling out a single form.
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