Posted in Finance, Accounting and Economics Terms, Total Reads: 372
Definition: Primary Beneficiary
First let us see what does a beneficiary means, he is person or legal entity who receives money or any other benefits from a benefactor. For example in case of a life insurance, beneficiary is the person who receives the payment the amount of insurance in case the insured dies. There are different types of beneficiaries like Primary Beneficiary and Contingent Beneficiary.
So then who is a primary beneficiary, he is the person or legal entity who would be the first in line to inherit an asset or receive an insurance amount. So if the primary beneficiary is unable to receive the amount, then the contingent beneficiary is the person or legal entity who will inherit an asset or the insurance amount. Usually if have any insurance policy, then it is beneficial to name a primary and contingent beneficiary, as they would be the persons in line of order of primary and the contingent to receive insurance amount. The same is the case for any bank account/Fixed Deposit or any other sort of investments like Shares, Bonds etc.
In these cases also it is beneficial to name a primary beneficiary who would receive the money, shares, and bonds in case of any untimely death. So let us understand the significance of a primary beneficiary, so he is the person who is first in line to receive the money of any insurance claim and his first in line authority cannot be changed as he is given the legal authority to be first in line for receiving the credit. Though there can be more than one primary beneficiary, in such a case the claim amount would be equally divided among all of them.
Also if there is a sole beneficiary named, he/she/legal entity is automatically becomes the primary beneficiary.