LLQP Life Insurance · Component 4.2 · 10% of the exam
When life insurance proceeds are payable to the estate rather than a named beneficiary, a practical consequence is that:
- AThe executor receives them personally, as compensation for administering the deceased's affairs
- The proceeds form part of the estate, may face probate fees and delays, and are available to creditors
- CThe proceeds are taxed as income on the deceased's final return, since the estate is not an individual
- DThe insurer refuses to pay until the estate has been fully administered and all creditors have been settled
Correct answer: B) The proceeds form part of the estate, may face probate fees and delays, and are available to creditors
Estate designations forfeit the direct-payment advantages of a named beneficiary: probate exposure, creditor claims and delay. The claims process runs through the executor with letters probate. This is why designation review is part of service.
Why the other options are wrong
- AThe executor receives proceeds on behalf of the estate, not personally.
- CProceeds to the estate are still not income; the issue is probate and creditors.
- DThe insurer pays the estate; it does not refuse.
Exam tip
Estate as beneficiary = probate fees, delay and exposure to creditors. A named beneficiary avoids all three.
Common mistake
Defaulting the beneficiary to the estate for convenience.
What this tests
CISRO competency component 4.2 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Life Insurance module. Written against the published curriculum.
More from component 4
- After a policy is reinstated, the contestability period:
- A revocable beneficiary designation is changed by:
- A client asks the agent to hold the beneficiary change form 'until next week' and dies in the meantime. The consequence is that:
- A client wants to reduce the face amount of her policy because her needs have fallen. The agent should note that:
- A client is unable to pay premiums temporarily on a whole life policy. Before letting it lapse, the agent should suggest:
- A client's term policy is being replaced with a new one from another insurer because it is cheaper and he remains healthy. To protect the client, the agent should ensure that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.