In what order do beneficiaries receive proceeds from a life insurance policy?

The correct understanding of how beneficiaries receive proceeds from a life insurance policy is based on the concept of succession of beneficiaries. This means that beneficiaries are designated in a hierarchy or order as specified in the insurance policy. If a primary beneficiary is deceased at the time of the policyholder's death, then the proceeds may pass to a contingent or secondary beneficiary as outlined in the policy.

The succession method ensures that the insurer pays the benefits according to the predetermined order set forth by the policyholder, which aligns with their wishes. In a well-structured policy, the policyholder may name primary and secondary beneficiaries, allowing clarity on who is entitled to receive the proceeds in cases of multiple beneficiaries or unforeseen circumstances.

Understanding this hierarchy is essential for both policyholders and beneficiaries, as it directly affects how the proceeds will be distributed and can help avoid disputes among beneficiaries.