Practice Quiz

Health and Life Insurance

Category - Annuities & Policies

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When Alisa’s mother died, she designated Alisa as the sole beneficiary of her settlement. Alisa has opted to receive interest only payments on the policy. Prior to the lump sum being paid to Alisa, she dies. What will happen to the balance of Alisa’s mother’s life insurance policy?
  1. It will be paid to Alisa’s estate
  2. It will be paid to the primary beneficiary named in the original policy.
  3. It is paid to contingent beneficiary from the original policy or it is paid to Alisa’s estate if there is no contingent
  4. It is retained by the insured and used as surplus
Explanation
Answer: C - Alisa’s mother policy will be paid to the contingent of the original policy or to Alisa’s estate if there is no contingent. Alisa’s mother may have chosen to establish a contingent and possibly a tertiary beneficiary to her policy. In the case of a contingent or tertiary, the remainder of Alisa’s mother’s policy would be paid to that individual(s). If Alisa’s mother’s policy did not declare a contingent, the lump sum will be added to Alisa’s estate and be paid to her beneficiary.
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