Rhode Island Life Insurance Practice Exam

What is typically required when a minor is named as a beneficiary?

1. A trust fund

2. A living will

3. A guardian must be appointed

4. A joint policyholder

The correct answer is: A guardian must be appointed

When a minor is named as a beneficiary in a life insurance policy, it is typically required that a guardian be appointed to manage the proceeds until the minor reaches the age of majority. This is essential because minors are not legally able to manage financial assets or make significant financial decisions independently. The guardian serves as a responsible adult who can oversee the assets and ensure that the funds are used in the best interests of the minor. Establishing a guardian ensures that the insurance proceeds are handled appropriately, providing protection for the minor's financial future. Without this legal arrangement, there could be complications or delays in the distribution of funds, potentially leading to financial hardship for the minor. The other options do not apply in the same context. For example, while a trust fund may be established for a minor to manage the assets, it is not always mandatory. A living will pertains to healthcare decisions and is unrelated to financial matters of beneficiaries. Lastly, a joint policyholder status does not directly address the needs of minor beneficiaries regarding the management of the benefits.