Life & Health Insurance Exam (National Portion)Life InsuranceMedium
A life insurance policyowner has designated their spouse as the primary beneficiary and their two children, equally, as contingent beneficiaries. If the spouse predeceases the insured, and one child also predeceases the insured, how will the death benefit be distributed upon the insured's death?
- AThe entire death benefit will go to the surviving child.
- BThe death benefit will be split equally between the surviving child and the deceased child's estate.
- CThe death benefit will be split equally between the surviving child and the insurer.
- DThe death benefit will revert to the insured's estate.
Show answer & explanationAnswer & explanation
Correct answer: A. The entire death benefit will go to the surviving child.
Unless otherwise specified, contingent beneficiaries are typically designated 'per capita' or 'by the head,' meaning that the surviving contingent beneficiaries share the benefit equally. If one contingent beneficiary predeceases the insured, their share is distributed among the remaining contingent beneficiaries.
Why the other options are wrong
- B. Unless 'per stirpes' (by the branch) was specified, the deceased child's share would not go to their estate but to the other surviving contingent beneficiaries.
- C. The insurer does not receive any portion of the death benefit in such a scenario.
- D. The benefit would only revert to the insured's estate if there were no surviving primary or contingent beneficiaries.
Per Capita vs. Per Stirpes
Methods of distributing death benefits to beneficiaries. Per capita means 'by the head,' distributing equally among living beneficiaries. Per stirpes means 'by the branch,' distributing to the descendants of a deceased beneficiary.
- Per capita: Surviving beneficiaries share equally.
- Per stirpes: Deceased beneficiary's share passes to their heirs.
- Per capita is often the default if not specified.
Memory trick: Who gets the GOLD? Follow the beneficiary flow.