Secondary Beneficiary: Who Gets Paid If the First Dies in Ontario

If you are a policyholder, you may have seen both secondary beneficiary and contingent beneficiary on forms and wondered whether they differ. You may also want to know who is paid if the person you named first is gone.

This article explains how Ontario's Insurance Act treats a backup beneficiary, who is paid in each situation, and how to keep your designation current. It is general information, so confirm how it applies to your own policy.

Is a secondary beneficiary the same as a contingent one?

In everyday use, yes. Both terms describe the person who takes the money if the first-named beneficiary cannot. The Insurance Act's rule on a predeceased beneficiary's share refers to a contingent (secondary) beneficiary named in the policy as the policy's own provision for that share.

Some insurers or forms use the labels differently, for instance to rank several backups. Look at the wording and any definitions in your contract rather than assuming, and ask the insurer if it is unclear.

Who is paid if the first beneficiary dies first

The answer depends on what the contract or a declaration says. The Act fills the gap only where the documents are silent on who takes a predeceased beneficiary's share.

If the money goes to the estate, it becomes part of the estate and is dealt with under the will or intestacy rules, together with estate debts.

Naming your estate, heirs or next of kin

Some people write heirs or next of kin as the backup. Under the Act, naming the insured's heirs, next of kin or estate counts as naming the insured's personal representative, so the money is paid to the estate.

That has consequences. Where a beneficiary is designated, the money is not part of the estate and is not subject to the insured's creditors. The creditor shield in the Act applies only where a beneficiary is designated, and estate administration tax is charged on the value of the estate when probate is issued. Naming an actual person can therefore produce a very different result from naming your estate.

Keeping the designation current

• You may alter or revoke an ordinary beneficiary designation at any time by a declaration, subject to the rules on irrevocable designations.
• A declaration may be provided electronically if it meets the Authority's rules.
• An insurer may restrict or exclude in the contract your right to name beneficiaries, subject to the Authority's rules.
• A designation in a will has no effect against a designation made later than the will, and if the will is revoked, the designation in it is also revoked.
• If the first beneficiary is named irrevocably, you cannot change or revoke the designation without that person's consent while they are living.

If the secondary beneficiary is a child

A child can be a backup, but a child cannot easily receive and manage a large sum. If no one can give a valid discharge for a minor's insurance money, the insurer must pay it into court to the minor's credit, within 30 days after receiving the required evidence. The insurer may pay a guardian of property appointed under the Children's Law Reform Act instead.

You can appoint a trustee for a beneficiary in the contract or by declaration. If the designation sets no trust terms, the trustee may only hold and invest the money until the child turns 18. Terms of the trust are worth thinking through in advance.

What to do next

• Read your policy and declarations to see how the insurer labels primary and secondary beneficiaries.
• Decide what you want to happen if the first person dies before you, and whether your documents say so.
• Avoid vague labels such as heirs unless you intend the money to go to your estate.
• Update the designation by declaration after a death, separation or other major change.
• Consider a trustee if a backup could be a child.
• Ask a lawyer if you have an irrevocable beneficiary, a blended family, or a dispute risk.

Frequently asked questions