Leighton wants to buy a new car.He goes to the bank to get a loan for the purchase,and signs an agreement to pay $10.00 per month in premiums on a term life insurance policy which names the bank as the recipient of the policy proceeds in the event of his death before the loan is repaid.The bank is a(n):
A) incidental beneficiary.
B) creditor beneficiary.
C) donee beneficiary.
D) assignee.

Question

Quizplus · Accepted Answer

The bank is a creditor beneficiary because it will receive the policy proceeds only if Leighton dies before repaying the loan. As a lender, the bank has an insurable interest in the life of the borrower, and the insurance policy helps to protect its financial interest by ensuring that the loan will be repaid even if the borrower dies prematurely.

Leighton Wants to Buy a New Car