What Is Life Insurance
Life insurance;is a contract between you and an insurance company. Essentially, in exchange for your premium payments, the insurance company will pay a lump sum known as a death benefit to your beneficiaries after your death.
Your beneficiaries can use the money for whatever purpose they choose. Often this includes paying everyday bills, paying a mortgage or putting a child through college. Having the safety net of life insurance can ensure that your family can stay in their home and pay for the things that you planned for.
There are two primary types of life insurance: term and permanent life. Permanent life insurance such as whole life insurance;or universal life insurance;can provide lifetime coverage, while term life insurance;provides protection for a certain period.
Contingent Beneficiaries Under A Will
The discussion above relates to where the contingency” under which the contingent beneficiary receives the property is the death or unavailability of a primary beneficiary.
Under a will, there are other contingencies that can come into play. Other contingencies commonly include attaining a certain age, or the occurrence of a future event such as graduation from college.
What’s A Contingent Beneficiary
When you are deciding who should get the payout in case you should pass away, think of a contingent beneficiary as a Plan B.;
If, for some reason, your primary beneficiary cant or wont take the payout, the contingent beneficiary gets the money instead, so you still have control over who gets the life insurance proceeds. You can name pretty much anyone as your contingent beneficiary, including family members, friends, business partners, or non-profit charitable organizations.
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Is The Contingent Beneficiary Guaranteed To Get Some Portion Of The Payout
No. The contingent beneficiary gets the death benefit only if your primary beneficiary cant or wont take the payout.;
Remember, a contingent beneficiary is not a partial beneficiary. Contingent beneficiaries wont get any of the death benefit if the primary beneficiary is still around to receive the payout, and accepts it. If you want to make sure a person receives part of the death benefit, you need to name that person or organization as a primary beneficiary and decide how much of the death benefit you want them to receive.
Why Should You Name A Contingent Beneficiary
A contingent beneficiary isn’t always required for financial accounts and insurance policies. But it’s highly recommended, not just for your own peace of mind but to take away what would become a lot of unnecessary stress for your family.
If there isn’t an established beneficiary for your assets after your death, these assets end up going into probate. Once this happens, the parties who wish to receive those assets will have to fight for them in court, which can lead to intense and expensive family court drama.
With a primary and contingent beneficiary, the legal drama is no longer necessary and no one can manipulate what your wishes were for your assets. Everything is stipulated legally, and the contingent beneficiary allows for a firm back-up plan in case of emergency. You are providing peace of mind for you and your loved ones, settling everything while you can.
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Who Should You Never Name As Your Beneficiary
As long as you follow the rules, you can designate the person or entity of your choice as your beneficiary. However, some people may not qualify to be beneficiaries.;
One example is minor children. You may need to name a minor childs primary legal guardian as the beneficiary. Or, consider setting up a trust for the insureds minor children and name the trust as the recipient of the life insurance proceeds.;
This can help avoid many of the legal restrictions imposed on outright distributions and is a much safer and surer way to provide financial security for those who cant or dont want to handle large sums of money or other assets, Thompson says.
How To Choose Beneficiaries For Your Life Insurance Policy
Deciding on a beneficiary for your life insurance policy can be tricky, as there are so many factors to consider. Heres what to keep in mind when making this difficult decision.
Per stirpes is one of many important legal terms that life insurance companies use for their life insurance policies. If youre confused about any of the terms used in your policy, talk to your insurance agent for clarification, or ask a legal expert. They can also help you decide who to use as your life insurance beneficiaries if you arent sure. Its very important to understand the terms used in life insurance before you make a purchase, so you know exactly what youre getting.
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Who Should Be A Contingent Beneficiary
Anyone withinsurable interest can be named a primary or contingent life insurance beneficiary, including:
Pick a contingent beneficiary who depends on your financial support or would support your family if you die. Most people choose a close family member or the guardian of their children. However, your contingent beneficiary shouldnât be the person who would ideally get the death benefit â that person should be listed as your primary beneficiary.
Consult with a lawyer or financial advisor beforenaming a minor child as a beneficiary on your insurance policy. If your beneficiary has not reached the age of majority, youâll need to designate a custodian for the funds or create a trust for the child to receive the death benefit when they come of age.
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Can A Company Refuse To Pay A Claim In Case Of Suicide Or If I Do Not Tell The Truth On The Application Or In The Medical Exam
In the first two years after you buy a policy, the company can refuse to pay if the cause of death is suicide, or if you have made a material misrepresentation in the application. A “;material misrepresentation” happens if you do not tell the truth about a situation or medical condition which would have caused the company to deny you insurance if they had known the truth. If you understate your age to obtain a more favorable premium, the insurance company will reduce the death benefit to be equal to what your premiums would have purchased at the correct age.After the policy has been in force for two years, the company cannot contest the claim as long as you have paid the premiums. This is called;incontestability. If you change companies or policies, you may be required to go through another two year period in which the company could deny a claim because of suicide or a material misrepresentation in the application.
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How To Choose A Life Insurance Coverage Amount
A good rule of thumb for estimating how much coverage you need is to:
The resulting number is how much life insurance you need. It may look high, especially if youve factored in income replacement for many years. Still, life insurance quotes are free, so it doesnt hurt to price out the coverage you need.
If it turns out to be unaffordable, you can buy what you can afford now to lock in a good rate. You can buy more later, just be aware that several years from now your rate will be based on your older age and any health conditions youve developed.
Here is a calculator to help you estimate how much life insurance you will need.
Contingent With A Kick
Note that sellers might request a kick-out clause while they wait. In a contingency with a kick-out, sellers can continue to consider offers, and they will generally be looking at ones with fewer contingencies than the first offer.
While contingencies can be important to protect you, this is another reason to make your first offer with as few contingencies as possible. But the good news is that the sellers cant kick you out just because they find a better offer; they must notify you and give you a certain period of time to remove the contingencies.
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What Is The Difference Between Survivor And Beneficiary
A beneficiary can be anyone you choose to receive a lump sum or lifetime benefit and is not set by law. A survivor is defined by law. State law determines who, if anyone, is eligible to receive benefits as a survivor. The survivor and beneficiary can be the same person and often are, but dont have to be.
How Many Beneficiaries Should I Have
There is no definitive rule on how many beneficiaries you should have, although some policies or accounts may limit you to a maximum number . You definitely want to name a primary beneficiary, and you should have at least one, but ideally more than one, contingent beneficiary. If possible, its a good idea to discuss your wishes with your beneficiaries in advance. This way, if you need to have conversations about your decisions, you have time to do it, so you can reduce the chance of things becoming complicated after you pass away.;
Estate Planning is unfortunately something that many people resist or put off. But its important, as it allows you to safeguard and protect both your legacy and your loved ones. Choosing a primary and a contingent beneficiary ensures your estate and assets will go to those you intend. Failing to complete this important step means youll have no control over who ends up with what.
Is it time to update your Will to properly name contingent beneficiaries ? Trust & Will has streamlined the process so that youre protected when you need it most. Check out everything we have to offer.;
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Who Should Be Your Contingent Beneficiary
The choice of a contingent beneficiary is up to you.;
Heres who is often named as contingent beneficiaries:
- A child or children with the policyholders spouse named as the primary beneficiary
- An individual who would serve as the guardian to your children if you die
- Other family members and friends
- A charitable organization
Just remember that naming minor children as contingent beneficiaries can create issues, Thompson says.
An insurance company will not knowingly pay insurance proceeds outright to minor children, he says. Therefore, if a minor is named as a beneficiary, a guardian or custodian may have to be appointed by a court at the expense of the children.;
Also, remember to keep your list of contingent beneficiaries updated. For example, if your parents are contingent beneficiaries and both die, you will want to name new contingent beneficiaries.;
Can A Child Be A Contingent Beneficiary
A child can be either a primary or a contingent beneficiary. It is very common to list a spouse as the primary beneficiary and children as contingent beneficiaries. However, if the child is a minor, a guardian will need to be appointed to manage the asset, at least until the child reaches the age of majority. You could also extend the guardian’s management to a later age, for example, until the child graduates from college, or until the occurrence of another event you specify.
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Difference Between Primary And Contingent Beneficiary
This is common logic, really.
Primary beneficiaries are first in line and contingent beneficiaries are second in line.
When a policyholder is buying their life insurance, they can name whoever as their beneficiaries and they can name more than one. There is no limit! The math kicks in here: the percentage divided should in the end equal 100%. Well see how the math works later in this article with a real life example.
Primary beneficiaries are unable to make a claim because:
- They died with the policyholder
- Cant legally make a claim
- Are disabled or impaired
- Refuse and decline the offer
If either one of the above listed situations is true, then ONLY the death benefit is passed down to the contingent beneficiaries.
There is also an option of listing someone as the tertiary beneficiary- or someone third in line in case primary and secondary beneficiaries both are unable to make a claim. This is however a very rare situation, but is very much possible.
Your Assets And Beneficiaries Are Made Public Your Death Benefit Will Be Vulnerable To Creditors And Estate Taxes Until The Probate Period Ends Your Heirs Cannot Access Your Insurance Benefit
;;Lets take a look at an example.
Say you have a life insurance policy and you name your spouse the primary beneficiary but you dont name any contingent beneficiaries.
For your 20th wedding anniversary, your children gift you with a vacation to Hawaii. While driving to the airport, both you and your spouse tragically die in a car accident.
Because you and your only beneficiary died at the same time the life insurance death benefit goes into your estate.
Your children now wont receive any of the money until all debts and bills are paid after probate. Long story short, your contingent life insurance beneficiary is simply a backup in case your primary beneficiaries are unable to receive the death benefit.
Typically, primary life insurance beneficiaries are your spouse and adult children. Siblings and favorite charities are great contingent life insurance beneficiary options.
Listing a contingent beneficiary is super easy, so why not just do it?
One final note: be sure to let your beneficiaries know that they are included on your life insurance policy. You dont want your death benefit to go unclaimed when you thought you were taking care of your loved ones.
If you have any questions about life insurance, make sure to leave us a comment. And if youre ready to get quotes, check out Quotacy.com. Were here to help you find the best deal on the life insurance you want.;
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Whats The Difference Between Contingent And Pending
Contingent and pending are two terms that are often confused, but that indicate different parts of the sales cycle.
In the contingent sale, an offer has been accepted by the seller, but everyone is still working through the issues. Eventually the sale moves to pending, which means the issues have been resolved and the deal is almost done. At this stage, all parties are simply waiting for documentation to be completed so the sale can move to closing.
Once youre in the pending stage, youre almost there; most sellers will not continue to show the home while its pending, as they are contractually precluded from accepting offers. The house is almost yours!
What Is A Life Contingency Option
What is a life contingency option? A life contingency option is an annuity payout option that provides a death benefit in case the annuitant dies during the accumulation stage. The terms and features of the life contingency option will vary from contract to contract.
What are life contingencies?;Life contingencies is a term used to describe survival models for human lives and resulting cash flows that start or stop contingent upon survival. A life table is simply a way of presenting a family of conditional survival random variables in a very concise way.
What is a life contingent annuity?;A contingent annuitant is someone designated by an annuitant to receive the annuitants payments when they pass away. When an annuity has a contingent annuitant, the annuity does not stop making payments until both the annuitant and the contingent annuitant have passed away.
What is a contingent survivor?;With a joint-and-survivor annuity, the second designated beneficiary is known as the contingent annuitant. If this individual is still alive at the time of the primary beneficiarys death, he or she will continue to receive the annuitys payments for the remainder of his or her life.
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What Is A Contingent Beneficiary And Who Can Be Named One
Whether setting up a financial account, applying for life insurance or executing a will, there’s a lot of paperwork required to get everything set up in a way that saves you and your loved ones any added stress.
One admittedly morbid but still incredibly important detail that has to be dealt with for all of these is who gets them after your passing. The more beneficiaries you plan on having, the more complex it can be.
Whether setting everything up by yourself or with the help of a professional, you’ll have to deal with the concept of a “contingent beneficiary” for your account, policy or will. So it’s important to know what a contingent beneficiary is, how it differs depending on what you’re doing and who can even be named one.
Let’s start with the first part. What exactly is a contingent beneficiary?
What Is A 10 Year Annuity
A 10 Year Certain And Life Annuity is a type of annuity that will provide payments to you for 10 years, even if you die. If the annuitant outlives the 10 years of guaranteed payments, then they would continue to receive income payments for life; however, no payments would be available for the beneficiary.
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Always Name A Contingent Beneficiary
A;contingent beneficiary;is a safety feature and a control device.;It is the most practical way to control the future distribution of wealth. Its a simple thing today, but not something that should be decided on lightly. You should spend a lot of time determining who your beneficiary should be.
Its also something that you should continue to maintain. There are dozens of different life changes that could impact who you would want to name as your beneficiary, which means that once youve named the primary beneficiary, it could change years down the road. Dont forget to look back at your policy and ensure that the beneficiary is still the valid recipient and the best choice for the policy payout.
Life insurance is the most important investment that youll ever make for your family and loved ones. You may ask yourself at what age should I get life insurance policy, of course, we recommend the younger the better because the more you age the more risk you are to having health problems, which will increase your premium rates. Purchasing life insurance at age 20 versus purchasing life insurance over the age of 50. Tomorrow is not the day to start your life insurance application.; Begin the process today!