Which of the following terms best describes the principle of a contingent beneficiary?

The term that best describes the principle of a contingent beneficiary is "secondary beneficiary." A contingent beneficiary is someone who is designated to receive the policy benefits if the primary beneficiary is unable to do so, usually due to death or incapacity. This ensures that there is a fallback option in the distribution of benefits, providing additional security and clarity in the handling of the policy.

In life insurance policies, there is typically a primary beneficiary listed to receive the death benefit first. If that primary beneficiary cannot accept the benefit—for instance, if they predecease the insured—the contingent or secondary beneficiary then becomes eligible to receive the benefit. This structure is crucial in estate planning, as it helps to avoid confusion and ensures that the insured’s wishes are honored even if the primary beneficiary is unavailable.

Understanding this hierarchy of beneficiaries helps policyholders make informed decisions about their insurance policies and how they want their benefits distributed after their passing.