Life & Health Insurance Exam (National Portion)Life InsuranceEasy
A life insurance policyowner has designated their three adult children, Alice, Bob, and Carol, as beneficiaries, with each to receive an equal share of the death benefit. If Bob predeceases the policyowner and the policy does not include a per stirpes designation, how will the death benefit be distributed upon the policyowner's death?
- AThe entire death benefit will revert to the policyowner's estate.
- BBob's share will be distributed to his heirs.
- CAlice, Bob's estate, and Carol will each receive one-third of the death benefit.
- DAlice and Carol will each receive one-half of the death benefit.
Show answer & explanationAnswer & explanation
Correct answer: D. Alice and Carol will each receive one-half of the death benefit.
Without a per stirpes designation, if a beneficiary predeceases the insured, their share is typically divided among the surviving beneficiaries. In a per capita distribution, the death benefit is distributed equally among the living members of the named class.
Why the other options are wrong
- A. The death benefit would only revert to the policyowner's estate if all named beneficiaries and contingent beneficiaries (if any) predeceased the insured, and no per stirpes clause was active.
- B. This would only happen if a per stirpes designation was in place, directing the share to Bob's descendants.
- C. Bob's estate would only receive a share if the policy specified it or if there were no other surviving beneficiaries and no per stirpes clause.
Per Capita (Beneficiary Designation)
A beneficiary designation method where the death benefit is divided equally among the surviving named beneficiaries. If a named beneficiary predeceases the insured, their share is typically redistributed among the remaining living beneficiaries.
- Death benefit divided equally among living beneficiaries.
- If a beneficiary dies, their share goes to the other surviving beneficiaries.
- Opposite of 'per stirpes' where the share would go to the deceased beneficiary's heirs.
Memory trick: Per Capita: Count the Heads, Share the Bread.