New Jersey Life Producer Practice Exam

In which scenario is an insurer permitted to pay the proceeds of a life insurance policy to a minor?

1. When the minor is emancipated

2. When a legal guardian has been appointed

3. When the minor is designated as the policyholder

4. When the policy is a whole life plan

The correct answer is: When a legal guardian has been appointed

The scenario in which an insurer is permitted to pay the proceeds of a life insurance policy to a minor is when a legal guardian has been appointed. Insurers have protocols in place to ensure that the funds are distributed responsibly and legally. When a legal guardian is designated, it provides a clear legal framework that allows the guardian to manage the minor's assets and ensure that the payout from the life insurance policy is used for the benefit of the minor. This is significant because, without a legal guardian, a minor cannot typically manage or control financial assets due to their age and legal status. While emancipation can grant minors certain adult privileges, it is the involvement of a legal guardian that specifically allows an insurer to safely transfer policy proceeds, ensuring the funds are handled appropriately. The other options do not provide a reliable basis for the insurer to make direct payments to a minor. For example, being designated as the policyholder does not automatically grant the right to access funds, and the nature of the life insurance plan (such as being a whole life policy) does not affect the legal ability to pay a minor without appropriate adult oversight.