Tennessee Life Producer Practice Exam

What best describes a contingent beneficiary?

1. The primary beneficiary of a policy.

2. A person designated to receive policy proceeds if the primary beneficiary is not alive.

3. An organization that benefits from the policy proceeds.

4. A legal representative of the insured's estate.

The correct answer is: A person designated to receive policy proceeds if the primary beneficiary is not alive.

A contingent beneficiary is specifically defined as a person who is designated to receive the policy proceeds in the event that the primary beneficiary is deceased or otherwise unable to receive the benefits when the insured event occurs. This role ensures that the policyholder's wishes are honored even if the primary beneficiary cannot fulfill their role at the time of the policyholder's death. This designation is crucial for estate planning because it provides a secondary option for the distribution of benefits, ensuring that the proceeds go to someone trusted by the policyholder. This helps avoid unintended consequences, such as benefits going to the estate or being subject to probate if no contingent beneficiary is named.