Beneficiaries Flashcards

Questions and Answers

Which of the following is a beneficiary designation based on a group of people with shared characteristics?

Contingent designation

Primary designation

Individual designation

Class designation (correct)

Who are the named individuals or entities the policyowner designates to receive life insurance policy proceeds upon the insured's death?

Beneficiaries

All of the following options are available if the only logical beneficiary is a minor, EXCEPT:

Trust

Insurance company holding the proceeds

The guardian

The benefits go directly to the estate of the insured (correct)

When Alice dies, the death benefit will be paid to Walter. If Walter dies before Alice, the benefit would go to Alexander. Which of the following statements is true?

The primary beneficiary is Walter and Alexander is the contingent beneficiary. Signup and view all the answers

Which beneficiary designation is most appropriate for a person who wants to name his spouse as a beneficiary of his life insurance policy, and simultaneously retain full policy ownership rights?

Revocable beneficiary Signup and view all the answers

Under the Uniform Simultaneous Death Act, who will receive the death benefit if Mary and Philip are in a car accident and there is no evidence of who died first?

Philip's children from his prior marriage Signup and view all the answers

Which of the following prevents creditors from seizing life insurance policy proceeds as long as there is at least one living named beneficiary, excluding the insured's estate?

Spendthrift clause Signup and view all the answers

If an irrevocable beneficiary is named on a life insurance policy, all of the following statements are true, EXCEPT:

Policyowners can borrow from cash value without consent. Signup and view all the answers

What does the Common Disaster Clause require?

Requires the primary beneficiary to outlive the insured by a certain number of days in order to receive the death benefit. Signup and view all the answers

What is true according to the Uniform Simultaneous Death Act if the insured and the primary beneficiary are killed in a car accident?

Policy proceeds are paid as if the primary beneficiary died first. Signup and view all the answers

Study Notes

Beneficiary Designations in Life Insurance

Class Designation: A group designation that allows all members sharing common traits to become beneficiaries.
Beneficiaries: Named individuals or entities that receive life insurance proceeds upon the insured's death.

Minor Beneficiaries

Options for minor beneficiaries include appointing a guardian, setting up a trust, or using the insurance company to manage proceeds.
Benefits cannot go directly to the estate of the insured if the sole logical beneficiary is a minor.

Primary and Contingent Beneficiaries

In scenarios where the primary beneficiary (e.g., Walter) dies before the policyholder (e.g., Alice), the contingent beneficiary (e.g., Alexander) will receive the benefit.
Alice’s relationship as the policyholder and Walter’s as the primary beneficiary defines their roles, with Alexander as the backup.

Revocable vs. Irrevocable Beneficiary

A revocable beneficiary designation allows the policy owner to retain full ownership rights while naming a spouse as the beneficiary.
An irrevocable beneficiary requires mutual agreement for changes; consent is needed for borrowing against the cash value.

Uniform Simultaneous Death Act

This act stipulates that if both the insured and primary beneficiary die simultaneously, the death benefit is distributed as if the primary beneficiary predeceased the insured.
If the primary beneficiary does not survive past a specified time after the insured's death, the benefit goes to the insured's estate or contingent beneficiaries.

Spendthrift Clause

A provision that protects life insurance proceeds from creditors, as long as at least one living named beneficiary is present, excluding the insured's estate.

Common Disaster Clause

Specifies that in case of a disaster, the primary beneficiary must outlive the insured by a certain number of days to claim the death benefit.
If the primary beneficiary fails to survive that period, the death benefit goes to the insured's estate.

Key Points about Borrowing from Cash Value

Policy owners with an irrevocable beneficiary must obtain the beneficiary's consent to borrow against the policy’s cash value.
This restriction emphasizes the legal standing of irrevocable beneficiaries in life insurance policies.

Description

Test your knowledge on beneficiaries with these flashcards. Each card presents a question about beneficiary designations, including class designations and named individuals. Perfect for anyone looking to understand life insurance better.