Beneficiary
The person or entity named to receive the death benefit from a life insurance policy when the insured dies.
A beneficiary is the person, trust, estate, or organization designated to receive the proceeds of a life insurance policy upon the insured's death. Primary beneficiaries receive the proceeds first; contingent (secondary) beneficiaries receive the proceeds if all primary beneficiaries predecease the insured. Multiple beneficiaries can be named with percentage allocations.
Designating beneficiaries correctly is critical because life insurance proceeds pass outside of probate—directly to the named beneficiary regardless of what your will says. This means a policy naming an ex-spouse will pay that ex-spouse even if your will says otherwise. Beneficiary designations should be reviewed and updated after major life events: marriage, divorce, birth of a child, or death of a named beneficiary.
Minors cannot directly receive life insurance proceeds; if you wish to leave benefits to a child, name a trust or a custodial account as beneficiary. "Estate" is a poor beneficiary choice as it subjects the proceeds to probate, potential creditor claims, and estate administration delays.
Real-World Example
After getting divorced, the policyholder updated her life insurance beneficiary from her ex-husband to her two adult children, each receiving 50% of the $400,000 death benefit.