Most people who take out a life insurance policy are doing so to help protect their loved ones in the event that the primary policyholder passes away unexpectedly. This can be an important financial contribution to continue supporting your loved ones and it is imperative that you understand how the policy works. The policy is taken out under a specific face amount, which is the lump sum that your family or chosen beneficiaries will receive when you pass away.
So long as the policy is maintained as active through regular premium payments, your loved ones will be able to file a claim with that life insurance carrier when you pass away. It is on you to decide on a life insurance beneficiary to receive those assets after you pass. There are a number of financial, tax and legal related implications that can all happen if you do not appropriately name a beneficiary. This means understanding the difference between primary and contingent life insurance beneficiaries.
A primary beneficiary is the people or persons who will receive the proceeds of the policy when the insured owner passes away. However, the beneficiary is not eligible to receive any proceeds if they pass away before the death of the insured party.
A contingent beneficiary is also known as a secondary beneficiary. This contingency beneficiary is only eligible to receive proceeds on a policy if the primary beneficiary passes away before the insured party. This makes it extremely important to understand how to select an appropriate life insurance policy and to name both primary and contingent beneficiaries to support your family’s unique needs. Make sure that a life insurance policy is part of your established estate plan by working with an experienced and knowledgeable estate planning lawyer in Virginia Beach.