Life Policy ProvisionsQuestion 553 of 716
A common problem with naming a minor child as the direct beneficiary of a life policy is that:
a.The death benefit automatically becomes taxable income
b.The insurer will refuse to issue the policy at all
c.Insurers usually will not pay proceeds directly to a minor, so a guardian or trust may be required
d.The insurer will double the required premium to cover the additional administrative risk of insuring on behalf of a minor child
Explanation
Minors generally cannot give valid receipt for insurance proceeds, so payment may be delayed until a court appoints a guardian or a trust is used. It does not prevent issuance, change the tax treatment, or raise the premium.
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Related questions on this topic
- Under a per capita distribution among named beneficiaries, the proceeds are divided:
- Under a common disaster (simultaneous death) provision, if the insured and primary beneficiary die in the same accident and the order of death cannot be determined, proceeds are paid as though:
- A contingent (secondary) beneficiary receives the death benefit when:
- Naming one's estate as the life insurance beneficiary can be disadvantageous because the proceeds may then be:
- A spendthrift clause attached to a life insurance settlement is designed to:
- The waiver of premium rider typically begins paying the policy's premiums only after:
Last reviewed: · editorial process
PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)