Rhode Island Life Insurance Practice Exam

What is a contingent beneficiary?

1. Person designated to receive policy proceeds if the primary beneficiary is deceased

2. Individual who receives payments in case of accidental death

3. Beneficiary who receives funds after a specified time period

4. Person automatically receiving policy benefits upon policy issuance

The correct answer is: Person designated to receive policy proceeds if the primary beneficiary is deceased

A contingent beneficiary is essentially a backup beneficiary designated to receive policy proceeds if the primary beneficiary is unable to do so, typically due to their death before the policyholder. This arrangement ensures that the policy proceeds are allocated in a structured manner and that the intended financial support reaches someone in the event the primary beneficiary is no longer available to claim the benefits. This designation is important for estate planning, as it helps to avoid complications or delays in the distribution of funds. It is a way for the policyholder to clarify their wishes and ensure that their assets are handled according to their intentions. In practice, designating a contingent beneficiary provides an additional layer of security and decision-making regarding the distribution of life insurance benefits, thereby protecting the policyholder's legacy. The other choices do not accurately describe a contingent beneficiary's role or function within a life insurance policy. The individual who receives payments for accidental death refers to a specific type of insurance provision rather than a beneficiary designation. The mention of a beneficiary receiving funds after a specified time period does not align with how life insurance proceeds are typically disbursed. Lastly, the idea of a person automatically receiving benefits upon policy issuance refers more to a direct beneficiary designation rather than the contingency aspect that defines a contingent beneficiary's role.