07/25/2025
TYPES OF BENEFICIARIES
1. In the case of Life insurance, a beneficiary is the person the policy owner names to receive the policies death benefits upon the death of the insured. Carefully designating life insurance beneficiaries is important because the insurance company must follow the owners instructions precisely.
a.
Attention must be given to:
i. The order of beneficiaries and their succession
ii. The succession of beneficiaries
iii. The share of the proceeds each will receive, if more than one beneficiary is named
b.
A life insurance beneficiary may be:
i. A primary beneficiary
ii. A contingent beneficiary
iii. Designated as a per capita or per stripes beneficiary
iv. A revocable or irrevocable beneficiary
v. Part of a class of beneficiaries
2. Let's consider each of these beneficiary designations.
THE PRIMARY BENEFICIARY
3. The primary beneficiary is the person who will receive the entire death benefit proceeds upon the death of the insured, assuming the beneficiary outlives the insured. A primary beneficiary may be one of several primary beneficiaries, each of whom will receive a portion of the death benefit proceeds upon the death of the insured.
a.
For example, a policy owner may designate:
i. "John Jones, my brother, to receive one-half of the death benefit; Sarah Peters, my sister-in-law, to receive
one-quarter of the death benefit; and the salvation army to receive one-quarter of the death benefit."
4. Each of the named beneficiaries-John Jones, Sarah Peters, and the salvation army-is considered a primary beneficiary. If no living beneficiary has been named by the time of the insurer's death, death benefits are normally payable to the insured probate estate.
THE CONTINGENT BENEFICIARY
5. In most cases, life insurance policy owners name a primary beneficiary and a contingent beneficiary. Hey continue beneficiary would receive the death benefit proceeds only if the primary beneficiary dies before the insured.
a.
An example of a beneficiary designation showing a contingent beneficiary is:
i. "To my spouse, Miriam Walters, if living; if not, to my son, Arthur Walters"
ii. In this case, the contingent beneficiary is Arthur walters. Arthur would only receive the death benefit proceeds if Miriam Walters died before the policy insured.
PER CAPITA AND PER STIRPES
BENEFICIARY DESIGNATION
6. Per capita and per stirpes are Latin words and translate to "by the head" and "by the trunk" respectively. They direct how a deceased beneficiary's portion of the death benefit will be distributed.
PER CAPITA
7. A per capita beneficiary designation gives a deceased beneficiaries portion of the death benefit to the other beneficiaries in the same class of beneficiaries. A per stirpes beneficiary designation gives a deceased beneficiaries portion of the death benefit to his or her children equally.
8. For example, supposed Terrence leaves his life insurance death benefit to his sons John and Michael, equally. Under a per capita beneficiary designation, if John or Michael dies before their father, the remaining beneficiary will receive the deceased beneficiary's share. So, if John were to die before Terrence, Michael would receive the portion of the death benefit that would have gone to John.
a.
Such a per capita beneficiary designation would say:
i. "To my sons, John and Michael, equally, or the survivor"
PER STIRPES
9. Suppose, however, that each of the beneficiaries has two children and the policy owner wanted to provide that the children of a deceased beneficiary would receive his share of the death benefit proceeds.
a.
A per stirpes beneficiary designation would say:
i. "To my sons John and Michael, equally, and to the surviving children of any deceased beneficiary, per stirpes."
10. Thus, under a per stirpes beneficiary designation, if John died before his father, John surviving children would take his share equally.
