Which statement about third-party beneficiaries is true?

Which statement about third-party beneficiaries is true?

• A. They must know of the contract at inception.
• B. They may acquire certain rights enforceable against the company.
• C. They may disclaim any benefits under the contract.
• D. Their rights can be negated by any defenses available to the insurer against the owner.

Answer: (B)

In life insurance, a third-party beneficiary is someone who is not the policyowner or the insured but is intended to benefit from the contract. When the designation creates an intended beneficiary, that person has enforceable rights against the insurer to receive the policy proceeds. This is why the correct statement is that they may acquire rights enforceable against the company—the insurer owes the proceeds to the intended beneficiary, not just to the owner. Knowledge of the contract at inception isn’t required for these rights to exist; what matters is the intent to benefit the beneficiary. The beneficiary also can’t simply disclaim benefits; their rights arise from the contract as intended by the designations. Finally, while the insurer can raise defenses against payment (such as misstatement of age or health) those defenses don’t automatically wipe out the beneficiary’s rights in all cases—the rights depend on the contract and applicable defenses, not a blanket negation of the beneficiary’s claim.

In life insurance, a third-party beneficiary is someone who is not the policyowner or the insured but is intended to benefit from the contract. When the designation creates an intended beneficiary, that person has enforceable rights against the insurer to receive the policy proceeds. This is why the correct statement is that they may acquire rights enforceable against the company—the insurer owes the proceeds to the intended beneficiary, not just to the owner.

Knowledge of the contract at inception isn’t required for these rights to exist; what matters is the intent to benefit the beneficiary. The beneficiary also can’t simply disclaim benefits; their rights arise from the contract as intended by the designations. Finally, while the insurer can raise defenses against payment (such as misstatement of age or health) those defenses don’t automatically wipe out the beneficiary’s rights in all cases—the rights depend on the contract and applicable defenses, not a blanket negation of the beneficiary’s claim.