Tennessee Insurance Practice Exam

How would you best describe a contingent beneficiary?

1. Primary beneficiary's sibling

2. Person designated to receive policy proceeds if the primary beneficiary passes before the insured

3. Individual responsible for managing the policy

4. Health care proxy of the insured

The correct answer is: Person designated to receive policy proceeds if the primary beneficiary passes before the insured

A contingent beneficiary is best described as a person designated to receive policy proceeds if the primary beneficiary passes away before the insured. This role is essential in ensuring that the policy's benefits are distributed to another party in case the primary beneficiary is unable to do so due to their prior death. This mechanism provides a safeguard in the event of unexpected circumstances and ensures that the insured’s wishes regarding the distribution of benefits are honored even if the primary beneficiary is not available. The other options do not align with the definition of a contingent beneficiary. For example, while a primary beneficiary's sibling might be a potential beneficiary, they do not inherently have the designation of contingency unless explicitly stated. Additionally, an individual responsible for managing the policy acts in a different capacity, specifically involved in overseeing the policy rather than receiving benefits. Similarly, a health care proxy is designated for making medical decisions on behalf of another, which does not pertain to receiving insurance proceeds.