What is the difference between a "primary" and "contingent" beneficiary?

The distinction between a primary and contingent beneficiary lies in their order of entitlement to the death benefit of an insurance policy. The primary beneficiary is the individual or entity designated to receive the death benefit when the insured passes away. If the primary beneficiary is alive and able to receive these benefits at the time of the insured's death, they will be paid first.

In contrast, the contingent beneficiary serves as a backup option; this means that if the primary beneficiary is unable to receive the funds—if they are deceased, for example—the contingent beneficiary will then be eligible to receive the death benefit. This arrangement ensures that the death benefit can still be allocated, even if the primary beneficiary is unavailable at the time of the insured's death. Thus, the correct understanding of the roles of primary and contingent beneficiaries is essential for managing life insurance policies effectively.