What is the consequence of not designating a contingent beneficiary?

When a policyholder fails to designate a contingent beneficiary, the proceeds from the life insurance policy will typically go to the estate of the insured after their death. This means that instead of an individual or organization receiving the funds directly, the money will be handled as part of the insured's overall estate. The process can introduce additional complications, such as delays related to probate and potential taxation on the estate, which can diminish the value of the proceeds received by heirs. By designating a contingent beneficiary, the policyholder ensures that there is a clear plan for the distribution of funds if the primary beneficiary is unable to receive them, thus avoiding this default scenario.