California Insurance License Exam Practice Test Practice Question
Creditors have rights to life insurance policy proceeds when the beneficiary is the
Correct Answer: B
Rationale: Creditors can claim life insurance proceeds if the beneficiary is the insured's estate (Option B). When the estate is the beneficiary, the proceeds become part of the estate's assets, which can be used to settle debts.
In contrast, if the beneficiary is the insured's child (Option A), spouse (Option C), or business partner (Option D), the proceeds typically pass directly to them, protecting the funds from the insured's creditors. This distinction highlights the importance of beneficiary designation in safeguarding assets from creditors.
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