Life License Qualification Program (LLQP) Practice Exam

What will happen if the primary beneficiary of a life insurance policy dies before the insured?

1. Proceeds will go to the primary beneficiary's estate

2. Probate will decide who receives proceeds

3. Proceeds will go to the contingent beneficiary

4. Proceeds will go to the insured's estate

The correct answer is: Proceeds will go to the contingent beneficiary

When the primary beneficiary of a life insurance policy dies before the insured, the proceeds of the policy typically go to the contingent beneficiary. The role of the contingent beneficiary is to receive the death benefit if the primary beneficiary is not alive at the time of the insured's death. This presumes that a contingent beneficiary was named at the time the policy was created. If the contingent beneficiary is not named or is also deceased, other conditions may apply according to the policy terms or state law. However, generally, life insurance policies are designed to ensure that the benefits are distributed as per the named beneficiaries, providing a clear progression of who should receive the benefits under various circumstances, such as the death of a primary beneficiary. Understanding the hierarchy of beneficiaries in a life insurance policy is crucial for proper estate planning and ensures that the proceeds of the policy are dispensed according to the insured's wishes rather than through probate or other estate settlement processes.