When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments

Full Question:

When a life insurance policy stipulates that the beneficiary will receive payments in specified instalments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned instalments?

A. Spendthrift provision

B. Settlement option

C. Accelerated benefit provision

D. Loan provision

Answer:

The correct answer is A) Spendthrift Clause or Provision

Explanation:

The spendthrift clause protects life insurance proceeds from creditors. The beneficiary's creditors are prohibited from claiming any of the policy's benefits before the beneficiary is paid.

The spendthrift clause prevents the beneficiary from changing the way in which the policy benefits have been planned for payout. If for instance the payments are to be made over a 10 year period, the beneficiary cannot assign or transfer the proceeds to another party in order to obtain a lump sum payment.

Cheers!