Which beneficiary designation is next in line after the primary beneficiary?

The correct answer is the contingent beneficiary. In life insurance, the primary beneficiary is the individual or entity designated to receive the death benefit upon the policyholder's death. However, if the primary beneficiary is unable to claim the benefit—for instance, if they predecease the policyholder or are otherwise disqualified—the contingent beneficiary is then next in line to receive the benefit.

This designation serves as a safeguard to ensure that the death benefit is awarded to a designated party without lengthy delays or complications. The contingent beneficiary is typically chosen by the policyholder and is specified in the policy documentation, just like the primary beneficiary. This arrangement allows for clear succession planning regarding the distribution of the policy's benefits.

Understanding the role of contingent beneficiaries is essential for effective estate planning, as it ensures that the policyholder's intentions regarding the distribution of their assets are respected, even if unforeseen circumstances arise concerning the primary beneficiary.