What does this mean?
The beneficiary section in the application can be confusing or misunderstood. Let's try and clarify and give you additional insight around beneficiary designations.
Really, there are two ways to distribute the death benefit:
1. "Per Capita" which is a Latin term that literally means "by the head." According to this, in the event of the insured's death all listed beneficiaries will receive equal share of the death benefit. Which means, if a beneficiary dies before the insured then his/her share will go to the other listed beneficiaries.
2. "Per Stirpes" is a Latin term that means "by the branch". According to this, if a beneficiary dies before the insured, his/her descendants will receive their share, instead of it going to other named beneficiaries.
Here's an example: Jim, the insured, has three children: Sally, John, and Chris, who are listed as his primary beneficiaries. If Jim dies, his children will each receive equal shares of the death benefit (33.3% each).
What happens if the daughter, Sally, dies before Jim?
Under the "Per Capita" method, Sally's children would receive NOTHING. Instead, Sally's share will be split between John and Chris (50% each).
Under the "Per Stirpes" method, Sally's children would receive her share of 33.3%, and John and Chris would receive their 33.3% as well.