A beneficiary is the person, people, or entity you name to receive your life insurance death benefit. It sounds simple, but beneficiary designations are one of the most common places small mistakes cause big problems later, so it’s worth understanding how they actually work.

Primary vs. contingent beneficiaries

Your primary beneficiary is first in line to receive the payout. A contingent (secondary) beneficiary only receives it if the primary beneficiary has already passed away or can’t be located. Naming a contingent beneficiary is a simple step that prevents the payout from potentially having to go through probate if your first choice is unavailable.

Splitting a payout among multiple people

You can name multiple beneficiaries and assign each a percentage of the total death benefit. Just make sure the percentages add up to 100%. Insurers will follow the designation exactly as written.

“Per stirpes” designations

A per stirpes designation means that if a named beneficiary dies before you do, their share passes to their own children rather than being redistributed among your other beneficiaries. This is commonly used by grandparents or parents who want to make sure a branch of the family isn’t left out if something happens to one of their children first.

Common mistakes

• Never updating beneficiaries after a divorce, remarriage, or death in the family. The policy pays according to what’s on file, regardless of what a will says.
• Naming a minor child directly, which can force the payout into a court-supervised guardianship process rather than going smoothly to whoever is meant to care for the child.
• Forgetting to name a contingent beneficiary at all.

Beneficiary designations generally override what’s written in a will, which is exactly why it’s worth reviewing them any time your family situation changes.

This article is educational and general in nature. It isn’t personalized financial or legal advice. For complex situations, such as naming a minor or setting up a trust as beneficiary, consult an estate planning attorney.