What Does Contingent Beneficiary Mean on Ontario Policies?

You are filling in a life insurance form, or reading an old one, and it asks for a primary beneficiary and a contingent beneficiary. The second term is not everyday language, and it is easy to wonder whether that person is entitled to anything right now.

This article explains the term in plain words, shows when a contingent beneficiary actually receives money under Ontario's Insurance Act, and covers what happens when nobody named is alive. It is general information, not advice on your own policy.

What contingent beneficiary means in plain words

The primary beneficiary is the person first in line to receive the insurance money. The contingent beneficiary is the backup. The word contingent simply means the gift depends on something happening first, usually that the primary beneficiary is no longer alive when the insured person dies.

While the primary beneficiary is alive and still named, the contingent beneficiary generally receives nothing. Under the Insurance Act, the person insured can name themselves, their personal representative (estate) or a beneficiary, and can do so in the contract or in a separate declaration. A contingent beneficiary named in the policy is treated as the policy's own provision for a share that a predeceased beneficiary would have received.

When a contingent beneficiary is actually paid

The usual trigger is a primary beneficiary who dies before the insured. For example, a policyholder names her spouse as primary and her adult daughter as contingent. If the spouse dies first and the policy has not been changed, the policy itself provides for that share, so the daughter is the person it points to.

• The primary beneficiary has died before the insured and the policy names a contingent beneficiary for that share.
• Several primary beneficiaries were named and one has died. If the contract or declaration does not say who takes that share, it goes to the surviving beneficiaries, equally if there are several.
• The wording of the policy matters. Forms differ, so how a contingent designation interacts with other named people depends on what your document actually says.

When a contingent beneficiary gets nothing

Being named as a backup is not a guarantee. A few common situations leave the contingent beneficiary with nothing.

• The primary beneficiary survives the insured, so the backup is never needed.
• The insured changed the designation. Unless the designation is irrevocable, the insured may alter or revoke it at any time by a declaration.
• The designation was made in a will that was later revoked. If a will containing a designation is revoked, the designation is revoked too.
• A later designation was made. A designation in a will has no effect against a designation made after the will.

An insurer may also restrict or exclude in the contract the insured's right to name beneficiaries, subject to the Authority's rules. If you cannot find a way to name a backup, check the contract wording.

What happens if nobody named is alive

This last outcome matters. When the money goes to the estate, it becomes part of the estate and is dealt with under the will or the intestacy rules, together with estate debts. The creditor shield applies only where a beneficiary is designated, and estate administration tax is charged on the value of the estate when probate is issued.

By contrast, where a beneficiary is designated, the insurance money is not part of the insured's estate and is not subject to the claims of the insured's creditors. There is one notable exception: when a court sets dependant support, life insurance the deceased owned is added back to the net estate, so a designated beneficiary can be reached by a support order.

If the contingent beneficiary is a child

A child may be the backup, which raises the question of who manages the money. 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 instead pay a guardian of property appointed under the Children's Law Reform Act.

According to the Office of the Children's Lawyer, where no trustee is named, a child's share over $35,000 is paid into court until the child turns 18, while a share under $35,000 can be paid to the parent the child lives with, or the person with lawful custody. The insured may appoint a trustee for a beneficiary in the contract or by declaration.

What to do next

• Find your policy and any separate declarations, and read exactly who is named as primary and contingent.
• Confirm each person is still the right choice, and whether any of them has died, separated from you or changed circumstances.
• If you want a change, make it by a declaration rather than relying on a will, since a later designation prevails over one in a will.
• If a backup beneficiary is a child, consider whether to name a trustee.
• Check whether your insurer accepts electronic declarations, which the Act permits if they meet the Authority's rules.
• Speak with a lawyer if the policy is old, the wording is unclear, or someone might bring a support claim.

Frequently asked questions