Study for the Tennessee Insurance Exam. Prepare with a database of questions and flashcards, each offering hints and detailed explanations. Ace your exam confidently!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.


When would a contingent beneficiary receive proceeds from a life insurance policy?

  1. When the primary beneficiary is not designated

  2. When the insured applies for a loan

  3. When the primary beneficiary has died

  4. When the policy has matured

The correct answer is: When the primary beneficiary has died

A contingent beneficiary receives proceeds from a life insurance policy when the primary beneficiary has died. The purpose of having a contingent beneficiary is to ensure that there is a backup plan for the distribution of the policy's benefits if the primary beneficiary cannot receive them. In scenarios where the primary beneficiary passes away before the insured individual, the contingent beneficiary takes priority and becomes entitled to the benefits of the policy. In contrast, the other provided options do not align with the circumstances that allow a contingent beneficiary to receive payouts. For instance, if the primary beneficiary is not designated, the policy may go through probate, rather than automatically transferring to a contingent beneficiary. Similarly, an application for a loan does not affect beneficiary designations, nor does the maturation of the policy automatically trigger contingent beneficiary payouts, as maturation would generally refer to instances like the insured reaching a certain age or the policy terminating under specific conditions, where terms may differ from those concerning beneficiary designations.