Texas Life Agent Practice Exam

The contingent beneficiary will receive policy proceeds when?

1. The primary beneficiary decides to relinquish the benefits

2. The insured cancels the policy

3. The primary beneficiary pre-deceases the insured

4. The insured reaches retirement age

The correct answer is: The primary beneficiary pre-deceases the insured

The contingent beneficiary will receive policy proceeds when the primary beneficiary pre-deceases the insured. This scenario is crucial because a contingent beneficiary is essentially a backup who only receives the benefits if the primary beneficiary is unable to do so. If the primary beneficiary passes away before the insured, the contingent beneficiary steps in and is entitled to the policy proceeds. This arrangement ensures that the intended financial support or benefits will still be distributed, despite changes in the beneficiary's status. It's a fundamental aspect of estate planning within life insurance policies, ensuring that proceeds go to a designated recipient, even if the primary choice is no longer available.