Which Of The Following Best Describes A Contingent Beneficiary
A. Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured.
B. Person designated by the primary beneficiary’s executor to receive policy proceeds.
C. Person designated by the state to receive policy proceeds in the event that the primary beneficiary dies.
D. Person designated by the insurance comapany to receive policy proceeds in the event that the primary beneficiary dies.
Correct Answer: A. Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured.
A contingent beneficiary is a crucial aspect of life insurance policies and other financial instruments, as they determine who will receive the policy proceeds if the primary beneficiary is unable to do so.
The correct answer to the question is option A: “A person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured.”
Let’s delve into the detailed explanations for each option to understand why option A is correct and the others are not.
A. Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured (Correct):
This statement accurately defines a contingent beneficiary. When an insured individual purchases a life insurance policy, they typically name a primary beneficiary to receive the policy proceeds upon their death.
However, if the primary beneficiary predeceases the insured, the contingent beneficiary is the individual designated by the insured to step in and receive the proceeds. This ensures that the policy benefits are directed to a secondary recipient according to the insured’s wishes.
B. Person designated by the primary beneficiary’s executor to receive policy proceeds (Incorrect):
This option is not an accurate description of a contingent beneficiary. The contingent beneficiary is selected by the insured and is not dependent on the actions or decisions of the primary beneficiary’s executor.
The executor’s role typically involves managing the deceased person’s estate, including the distribution of assets according to the individual’s will or state law.
The contingent beneficiary is a separate designation made by the insured to determine who will receive the insurance proceeds if the primary beneficiary cannot.
C. Person designated by the state to receive policy proceeds in the event that the primary beneficiary dies (Incorrect):
This option is not accurate because the state does not typically designate a contingent beneficiary for a life insurance policy. The state may become involved in distributing assets if there is no designated beneficiary, but this is usually governed by intestacy laws, which vary by jurisdiction and may not align with the insured’s wishes.
A contingent beneficiary is an individual chosen by the insured to ensure that the policy proceeds are directed to someone they trust or intend to benefit.
D. Person designated by the insurance company to receive policy proceeds if the primary beneficiary dies (Incorrect):
This option is also inaccurate. The insurance company does not have the authority to designate a contingent beneficiary unless explicitly specified by the insured in the policy contract.
The choice of a contingent beneficiary is a decision made by the policyholder to provide clear instructions on the distribution of the insurance proceeds in specific situations, such as the primary beneficiary’s predecease.
In summary, a contingent beneficiary is a person chosen by the insured to receive the policy proceeds if the primary beneficiary is unable to do so, typically due to their death before the insured.
This designation allows the policyholder to have control over the ultimate destination of the insurance benefits, ensuring that their wishes are honored.
Options B, C, and D are incorrect because they misrepresent the role and selection process of a contingent beneficiary, which is a critical aspect of life insurance planning for policyholders.
MBA,BBA.
I am Smirti Bam, an enthusiastic edu blogger with a passion for sharing insights into the dynamic world of business and management through this website.
I hold a MBA degree from Presidential Business School, Kathmandu, and a BBA degree with a specialization in Finance from Apex College,
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