A contingent beneficiary is a beneficiary that is next in line if the primary beneficiary pre-deceases the insured.  If an insured does not have a contingent beneficiary and the primary beneficiary dies before the insured, then the insured’s estate will be next in line to receive to the death benefit proceeds.   This is assuming the insured does not make a change.  The issue of leaving death benefit proceeds to an insured’s estate is that the proceeds become susceptible to creditors of the estate.  Even if there are not creditors, the proceeds will be distributed through probate according to intestate law.  The state in which the insured’s estate is settled in will determine who gets the proceeds.  This may be entirely against what the insured wanted to happen when he or she took out the policy.  An example might of an undesirable beneficiary could be a son who is addicted to drugs or gambling. 

The way to completely avoid this is to make sure that there is a contingent beneficiary.  The beneficiaries should also be reviewed from time to time as people’s feeling may change during the course of the policy.  It also possible to name numerous contingent beneficiaries and divide up the percentage of the death benefit that you want to go to each.  This is also valuable if one of those beneficiaries (and the primary) pass away before the insured.  This way the insured has those remaining contingent beneficiaries in line to receive a larger percentage. 

Having a contingent beneficiary is a way to ensure that there is a back-up beneficiary if the primary beneficiary predeceases the insured.  To not have this is taking a big risk.  This is especially true for clients who don’t conduct policy reviews periodically.  Many clients will forget who they had named for beneficiaries on policies taken out 10,20, or even 30 years ago.  This is a great way to give the client that piece of mind and possibly even look at other changes.