South Carolina Life Insurance Practice Exam

Which of the following is NOT a type of beneficiary designation?

1. Contingent beneficiary

2. Primary beneficiary

3. Reduced Paid-Up

4. Revocable beneficiary

The correct answer is: Reduced Paid-Up

The correct choice reflects an understanding of beneficiary designations in life insurance policies. Beneficiary designations refer to the individuals or entities that are designated to receive the policy benefits upon the insured's death. A primary beneficiary is the first in line to receive the death benefit, whereas a contingent beneficiary receives the benefits only if the primary beneficiary has passed away or is otherwise unable to claim them. A revocable beneficiary can be changed by the policy owner without needing the consent of the beneficiary, allowing for flexibility in managing the policy's benefit direction. On the other hand, "Reduced Paid-Up" is a non-beneficiary related term that describes a policy option allowing the insured to use the cash value of a whole life policy to purchase a reduced amount of paid-up insurance, thereby eliminating premium payments on the original policy. It does not pertain to the designation of beneficiaries at all, making it the correct answer to the question regarding which is NOT a type of beneficiary designation. Understanding the distinctions between these terms is crucial for effectively managing life insurance policies and ensuring that the policyholder’s intentions regarding benefit distribution are met.