Having a backup beneficiary, also called a contingent beneficiary, is a good idea. Many policy owners forget to update their policy when a beneficiary passes away. If there are no living beneficiaries, the insurance proceeds are left to the estate. Many of the financial advantages of life insurance evaporate whenever the estate is the beneficiary of a policy. Bottom line: always list a contingent beneficiary.
You can also split the insurance proceeds among several primary beneficiaries. This isn’t common on small policies, but it may serve a purpose on larger policies. Simply list out all the primary beneficiaries and what percentage they receive. Go to our contact us page if you have questions.