Massachusetts Life Producer Practice Exam

In the event of the policyholder's death, which of the following entities typically receives the death benefit?

1. The insurance company

2. The policyholder's estate

3. The designated beneficiary

4. The insured’s employer

The correct answer is: The designated beneficiary

The death benefit from a life insurance policy is typically paid to the designated beneficiary because that is the person or entity specifically named in the policy to receive the funds upon the death of the insured. The purpose of designating a beneficiary is to ensure that the proceeds go directly to the individual intended by the policyholder, allowing for more straightforward financial support for that person after the policyholder's passing. Designated beneficiaries can be individuals, such as family members or friends, or they can be entities like trusts or charities. This direct payment mechanism helps avoid the potential for delays and complications that could arise if the death benefit were to go through the policyholder's estate, where it could be subject to probate proceedings. Settling the death benefit this way reflects the policyholder's intent and provides immediate financial relief to the designated beneficiary, which is often a key reason for purchasing life insurance in the first place. By having a clear beneficiary designation, it guarantees that the policyholder's wishes are honored and that the financial assistance is available quickly, without unnecessary obstacles.