Beneficiary (life insurance)

The beneficiary is whoever the policyowner names to collect the proceeds. Designations are layered: the primary beneficiary has first claim, the contingent (or secondary) beneficiary receives the proceeds only if no primary beneficiary survives the insured, and a tertiary beneficiary stands behind both. Naming a class rather than an individual — "my children" — is also permitted, and proceeds are then divided among the surviving members of that class.

A designation is either revocable or irrevocable. A revocable beneficiary can be changed by the policyowner at will and has no vested rights in the policy. An irrevocable beneficiary cannot be removed without their written consent, and their consent is also needed for actions that reduce their interest, such as taking a policy loan or surrendering the contract. Most designations are revocable for exactly that reason.

When multiple beneficiaries share proceeds, the split is per capita or per stirpes. Per capita divides the benefit among surviving named beneficiaries only; per stirpes passes a deceased beneficiary's share down to that person's own heirs. If no named beneficiary survives, proceeds go to the insured's estate, where they become subject to probate and reachable by creditors — an outcome a properly maintained contingent designation avoids. A common disaster clause resolves cases where the insured and beneficiary die at nearly the same time.

Beneficiary rules are a heavily tested portion of the life insurance policy provisions section. State life licensing exams and the combined life and health exam expect you to work through primary versus contingent claims, apply per capita and per stirpes splits to a fact pattern, and recognize what an irrevocable designation prevents the policyowner from doing.