California Life and Health Insurance Practice Exam 2025 – Complete Test Prep

Question: 1 / 400

A spendthrift clause in a life insurance policy does what?

Allows beneficiaries unrestricted access to the benefits

Restricts the ability of the beneficiary to assign benefits

A spendthrift clause in a life insurance policy serves a specific function aimed at protecting the death benefit from being mismanaged by the beneficiary. By restricting the beneficiary's ability to assign the benefits, this clause ensures that the insurance proceeds are not subject to claims from creditors or that they cannot be transferred to others who may not have the same financial responsibility. This means that the benefits are protected for the designated beneficiary, allowing them to manage the funds appropriately and preventing them from squandering the proceeds.

This protective measure is especially important in cases where the beneficiary may be financially irresponsible or where there is a concern that creditors could seize the benefits. Consequently, the spendthrift clause creates a safeguard, ensuring that the payout will remain intact for its intended purpose.

Get further explanation with Examzify DeepDiveBeta

Increases the policy's cash value

Enables the insurer to change beneficiaries

Next Question

Report this question

Download California Life and Health Insurance Practice Exam PDF Study Guide
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy