PSI Ohio Insurance Practice Exam

How are proceeds from a life insurance policy distributed according to the per capita rule?

1. Equally among all beneficiaries regardless of relationship

2. Based on the share specified in the policy

3. Equally among living primary beneficiaries

4. By age, favoring older beneficiaries

The correct answer is: Equally among living primary beneficiaries

Under the per capita rule, the proceeds from a life insurance policy are distributed equally among all living primary beneficiaries. This means that if there are multiple primary beneficiaries and some of them have passed away, the share that would have gone to the deceased beneficiaries is divided among the survivors. For example, if a policy has three primary beneficiaries and one passes away, the proceeds will be shared equally between the remaining two, rather than passing down the deceased's share to their heirs. This distribution approach emphasizes fairness among the living beneficiaries and ensures that all currently designated primary beneficiaries receive an equal benefit, regardless of how many beneficiaries are named in total. It contrasts with other methods of distribution that may not take into account the current status of the beneficiaries or might distribute based on predetermined percentages or by age.