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When beneficiaries are designated "per capita" in a life insurance policy, it means

Rationale

Surviving beneficiaries must divide their share of the death benefits among any heirs of beneficiaries who predecease the insured.

When beneficiaries are designated "per capita," it indicates that if a beneficiary dies before the insured, that beneficiary's share will be divided among their heirs, rather than passing directly to the remaining beneficiaries. This structure ensures that the death benefits are equitably allocated among those who are living at the time of the insured's death, taking into account the deceased beneficiaries’ heirs.

A (The policyowner cannot revoke the class designation.) YOUR ANSWER

This statement is incorrect because the policyowner retains the ability to change beneficiary designations, including those classified under "per capita." The flexibility to revoke or alter beneficiary designations is a fundamental aspect of life insurance policies, allowing policyowners to adapt their plans as circumstances change.

B (Surviving beneficiaries must divide their share of the death benefits among any heirs of beneficiaries who predecease the insured.) CORRECT

This option accurately describes the "per capita" designation, where the share of a deceased beneficiary is redistributed to their heirs instead of the remaining beneficiaries. This ensures that the overall distribution of benefits reflects the familial or relational connections among the beneficiaries.

C (The policyowner cannot designate minor children as beneficiaries.) YOUR ANSWER

This choice is misleading because while it is often advisable to avoid naming minor children directly due to legal complexities, it is not universally prohibited. Policyowners can designate minors as beneficiaries, but they may need to establish a trust or appoint a guardian to manage the funds until the child reaches adulthood.

D (Surviving beneficiaries must share equally in the death benefits regardless of heirs of beneficiaries who predecease the insured.) YOUR ANSWER

This statement is incorrect as it contradicts the nature of "per capita" designations. Under this arrangement, the surviving beneficiaries do not simply share equally; instead, the share of any deceased beneficiary is passed on to their heirs, which can lead to unequal distributions depending on the number of heirs involved.

Conclusion

The "per capita" designation in life insurance ensures that death benefits are allocated among living beneficiaries and the heirs of those who predecease the insured. This method promotes an equitable distribution that acknowledges familial ties, contrasting with other forms of beneficiary designations. Understanding these nuances is crucial for policyowners to effectively manage their life insurance plans and ensure that their intentions are honored upon their passing.

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