What is NOT true regarding beneficiary designations in life insurance policies?

What is NOT true regarding beneficiary designations in life insurance policies?

• A. The beneficiary must have insurable interest in the insured
• B. A beneficiary can be a corporation or trust
• C. Beneficiaries can be changed by the policyowner
• D. Contingent beneficiaries receive payment if the primary beneficiary is deceased

Answer: (A)

The assertion that the beneficiary must have an insurable interest in the insured is not true regarding beneficiary designations in life insurance policies. In most cases, once a life insurance policy is in force, the beneficiary named does not need to demonstrate insurable interest in the insured individual. This means that, while insurable interest is a requirement at the time the policy is taken out (to prevent wagering contracts), it is not applicable to the beneficiary designation once the policy is established. On the other hand, a beneficiary can indeed be a corporation or trust, which provides flexibility in estate planning and management. Additionally, policyowners typically have the ability to change beneficiaries as their circumstances or intentions shift, allowing for adaptability in naming who will receive the policy's death benefit. Finally, the provision regarding contingent beneficiaries is a standard practice; these individuals receive payment if the primary beneficiary is no longer alive at the time of the insured's death, providing a secondary level of financial assurance.

The assertion that the beneficiary must have an insurable interest in the insured is not true regarding beneficiary designations in life insurance policies. In most cases, once a life insurance policy is in force, the beneficiary named does not need to demonstrate insurable interest in the insured individual. This means that, while insurable interest is a requirement at the time the policy is taken out (to prevent wagering contracts), it is not applicable to the beneficiary designation once the policy is established.

On the other hand, a beneficiary can indeed be a corporation or trust, which provides flexibility in estate planning and management. Additionally, policyowners typically have the ability to change beneficiaries as their circumstances or intentions shift, allowing for adaptability in naming who will receive the policy's death benefit. Finally, the provision regarding contingent beneficiaries is a standard practice; these individuals receive payment if the primary beneficiary is no longer alive at the time of the insured's death, providing a secondary level of financial assurance.