South Carolina Life Insurance Practice Exam

In terms of beneficiary designation in life insurance, which of the following is true?

1. The primary beneficiary must be a family member

2. Only one beneficiary can be designated

3. Multiple beneficiaries can be named

4. Beneficiaries cannot be changed after initial designation

The correct answer is: Multiple beneficiaries can be named

Multiple beneficiaries can be named on a life insurance policy, which allows the policyholder flexibility in determining how benefits are distributed upon their death. This means that an individual does not have to choose just one beneficiary; instead, they can specify several people or entities to receive a portion of the death benefit. This can be particularly useful in scenarios where the policyholder wants to provide for various family members, charities, or other organizations, thus ensuring that their wishes regarding benefit distribution are honored. Having multiple beneficiaries can also help avoid complications and disputes among heirs after the policyholder's death, as the specifics of distribution can be clearly defined. Additionally, the policyholder can specify what percentage of the benefit each beneficiary receives, further tailoring the distribution to their preferences. This aspect of beneficiary designation underscores the importance of planning and communication in life insurance coverage.