Policy Riders, Provisions, Options, and Exclusions
Why does consumer guidance advise against naming a minor child directly as beneficiary?
Answer and explanation
Answer: B. The NAIC Life Insurance Buyer's Guide advises against naming a minor child as beneficiary because insurance companies will not pay a minor, and suggests leaving the money to the estate or a trust instead. Minors can be insured, the tax treatment does not turn on the beneficiary's age, and the designation does not lapse at majority.Source: NAIC — Life Insurance Buyer's Guide — Buyer's Guide page 6, Choose a beneficiary
More policy riders, provisions, options, and exclusions questions
- An insurer tries to add an aviation exclusion after issue even though no aviation risk was disclosed or identified during underwriting. How does that compare with the Compact standard?
- An insurer wants to rely on a company underwriting manual to deny a claim, although the manual was never attached to the policy. What does the entire contract provision mean for that argument?
- An owner adds a spouse term rider to a base whole life policy. How is coverage structured for the spouse?
- An owner applies to reinstate a lapsed policy within the permitted period. What may the insurer require?
- An owner creates a trust for minor children and names the trust as policy beneficiary. What is the trustee's relevant role after the insured's death?
- An owner names 'my children, per stirpes.' One child dies before the insured but leaves two children. What result is the designation intended to produce?
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