Which of the following statements about beneficiary designations is true?

The statement regarding contingent beneficiaries being paid only if primary beneficiaries are deceased is true because the role of a contingent beneficiary is explicitly defined in life insurance policies. A contingent beneficiary serves as a backup to the primary beneficiary; they will receive the benefits only if the primary beneficiary is no longer alive at the time of the policyholder's death. This setup ensures that if the primary beneficiary cannot claim the benefit for any reason, the policy still has a designated recipient in place.

In the context of beneficiary designations, it is crucial to understand that while there can permanently designated primary beneficiaries, contingent beneficiaries are a practical element that ensures that the benefits are distributed according to the policyholder’s wishes even if circumstances change regarding the primary beneficiaries. This hierarchy of beneficiaries allows the policyholder flexibility in estate planning and ensures proper financial support for dependents.

The other options present misunderstandings: a policy can indeed have multiple primary beneficiaries but is not limited to unlimited ones, beneficiary designations are generally revocable unless specified otherwise, and policyholders can typically change beneficiaries after issuance unless an irrevocable designation has been made.