Naming a contingent beneficiary as “all surviving children” is described by which term?
A. Contingent designation B. Primary designation C. Class designation D. Tertiary designation
The Correct Answer and Explanation is :
The correct answer is C. Class designation.
Explanation:
In the context of beneficiary designations, the term “class designation” refers to a method of naming beneficiaries in a way that includes all members of a defined group rather than specifying individual names. When a policyholder designates “all surviving children” as a beneficiary, they are employing a class designation. This means that any child who survives the policyholder at the time of their death will automatically qualify as a beneficiary, without the need for individual names to be listed on the policy.
Class designations are particularly useful because they simplify the process of beneficiary designation. Instead of needing to update the beneficiary information each time there is a birth or death within the family, the policyholder can cover all potential beneficiaries by simply naming a class. This approach can help avoid complications that might arise from outdated beneficiary designations, such as naming a child who has since passed away or failing to include a new child.
Additionally, class designations can help ensure that the distribution of benefits is clear and equitable among members of the designated class. For instance, if the policyholder has three children and designates them as “all surviving children,” any death among the siblings will not affect the other children’s eligibility.
This designation is often contrasted with contingent and primary designations. A primary designation specifies individuals who receive benefits first, while a contingent designation names alternate beneficiaries who receive benefits only if the primary beneficiaries are not available. Tertiary designation would refer to beneficiaries further down the hierarchy, but in the case of “all surviving children,” it fits most appropriately under class designation.