What Does Tertiary Beneficiary Mean?

The term “tertiary” is from the Latin word “tertiarius,” which translates to “of a third.” The word is used to refer to a third order, level, stage, rank or designation, as in “tertiary education," which follows primary and secondary levels of education. In the insurance industry, a tertiary beneficiary is a person or entity entitled to receive benefits in the event the first and second beneficiaries cannot.

A beneficiary is a person or entity designated to receive assets upon another person's death. Specific beneficiaries are named in a last will and testament or in a life insurance policy; they typically include a person’s spouse, children or other relatives. Some people designate charities, trusts or other legal entities as beneficiaries instead of family members, either by choice or because none exist. A person may even choose to leave everything to benefit the care of a beloved pet. However, some types of financial accounts and insurance policies may automatically elect a surviving next of kin as the default beneficiary if no other beneficiaries were designated when the account was created.

As the name suggests, a tertiary beneficiary is third in line in terms of the distribution of assets or the payout of life insurance benefits. However, being named as a tertiary beneficiary doesn’t mean that you can expect to receive one-third of the contents of an estate or insurance policy benefits after the first and secondary beneficiaries get their shares. Instead, it means that you will only receive property or a payout by default if the first and second beneficiaries have died or are no longer eligible or qualified as beneficiaries. For example, if you named your spouse as primary beneficiary and then get a divorce, your spouse automatically loses her designation as your primary beneficiary.

To illustrate how a tertiary beneficiary fits into a benefits payout, assume that your last will and testament or an insurance policy designates your spouse, child and grandchild as primary, secondary and tertiary beneficiaries, in that order. If, at the time of your death, your spouse is living, then he or she will receive 100 percent of the assets or benefits. If your spouse predeceases you, then your child will receive 100 percent. If your grandchild is the only surviving beneficiary at the time of your death, then he or she will receive the entire amount. However, if all three are living at the time of your death, only the primary beneficiary, your spouse in this scenario, will receive any benefits.

It’s a good idea to review your last will and testament and insurance policies periodically and update them accordingly. This is particularly important if your circumstances change, such as the death of a spouse or a divorce. Consult your attorney, insurance agent or financial advisor for guidance.