In a life-insurance policy, the person designated to receive the death benefit is called the beneficiary.
A beneficiary may be an individual, several people, a trust, or an organization. The policyholder normally names beneficiaries when applying for coverage and can often update the designation later, subject to the policy’s terms. The death benefit is the amount the insurer pays after the insured person dies and the claim is approved.
Life-insurance policies commonly distinguish between primary and contingent beneficiaries. A primary beneficiary has first priority, while a contingent beneficiary receives the benefit if the primary beneficiary cannot. A policy may also divide the benefit into percentages among multiple beneficiaries. A revocable designation can generally be changed; an irrevocable designation usually requires the beneficiary’s consent for changes.
The beneficiary is not necessarily the policyholder or the insured person. The policyholder owns the contract, the insured person is the person whose death triggers the benefit, and the beneficiary receives the money. Clear, current designations help avoid disputes and delays in distributing proceeds.