Life Insurance Beneficiary Definitions and Exam Rules

The primary beneficiary is first in line to receive the death benefit. A contingent, or secondary, beneficiary generally receives proceeds if no primary beneficiary qualifies when the insured dies.

A policy can name more than one beneficiary and assign percentages. If a designation fails or no beneficiary survives, the contract and state law determine whether proceeds are paid to the policyowner’s or insured’s estate.

A policyowner can generally change a revocable beneficiary without that beneficiary’s permission. An irrevocable beneficiary has a vested contractual interest, so changing the designation—or taking certain actions that impair that interest—generally requires the beneficiary’s consent.

Exam questions often ask who controls the policy. Remember that the policyowner, not the insured or beneficiary merely by holding that role, exercises contractual ownership rights subject to any irrevocable designation or assignment.

Per stirpes distribution follows a deceased beneficiary’s family branch, allowing that beneficiary’s descendants to share the portion the beneficiary would have received. Per capita distribution divides proceeds equally among the surviving beneficiaries in the designated class.

Always use the wording in the question and policy. A named-beneficiary designation can produce a different result from a class designation or a designation with explicit per stirpes language.

Beneficiary questions are often role-identification questions disguised as family scenarios. Map the owner, insured, primary beneficiary, and contingent beneficiary before answering.