Primerica Life Producer Practice Test

Which of the following describes the function of a contingent beneficiary?

1. A beneficiary who has equal rights to the primary

2. A back-up recipient of the death benefit

3. A beneficiary with reduced benefits

4. A beneficiary who must collect the benefit first

The correct answer is: A back-up recipient of the death benefit

The function of a contingent beneficiary is primarily to serve as a backup recipient of the death benefit in the event that the primary beneficiary is unable to receive the benefit. This can occur if the primary beneficiary predeceases the policyholder, if they disclaim the benefit, or if they cannot be located at the time of the policyholder's death. The contingent beneficiary will then be entitled to receive the death benefit, ensuring that the policy proceeds go to a designated individual instead of reverting to the estate or being left unclaimed. The other options do not accurately reflect the role of a contingent beneficiary. Equal rights to the primary beneficiary and reduced benefits don't capture the essence of being a backup. Furthermore, there’s no requirement for a contingent beneficiary to collect the benefit first, as they come into play only if the primary beneficiary is unable to collect. Therefore, the definition given accurately describes the important role a contingent beneficiary plays in life insurance policies.