West Virginia State Life Insurance Practice Exam

A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?

1. Proceeds will go to the insured's estate

2. Proceeds will go to the contingent beneficiary

3. The policy will be canceled

4. Proceeds will be redirected to the primary beneficiary's family

The correct answer is: Proceeds will go to the contingent beneficiary

When the primary beneficiary has predeceased the insured and a contingent beneficiary is named in the life insurance policy, the proceeds will go to the contingent beneficiary upon the insured's death. The contingent beneficiary is essentially a backup to the primary beneficiary, ensuring that the death benefits are distributed according to the insured's wishes, even in the event that the primary beneficiary cannot receive them. In this scenario, the policy still remains valid and effective, which is why the option related to cancellation is not applicable. The life insurance company will distribute the proceeds as outlined in the policy. Since the primary beneficiary passed away before the insured, they are no longer eligible to receive any benefits, and therefore, the proceeds will not go to the estate of the insured or be redirected to the family of the deceased primary beneficiary. The contingent beneficiary is next in line to receive the benefits, ensuring that the insured’s intent for the distribution of the policy’s proceeds is honored.