A husband buys an insurance policy with a face value of $100,000 and names his wife as sole beneficiary.When the husband dies,the insurance company refuses to pay the wife the $100,000.Which of the following best describes this situation?

Question

Quizplus · Accepted Answer

The wife in this case is a third-party beneficiary, and as such, has the right to enforce the contract and be paid the benefits. The insurance policy was meant to benefit her, even though she was not a party to the original contract. Therefore, she can sue the insurance company for the $100,000. Choice A is incorrect because lack of privity does not always prevent recovery by a third-party beneficiary. Choice B is incorrect because the wife was not a party to the contract. Choice C is incorrect because the wife has an insurable interest in her husband, which is why the policy was taken out in the first place.

A Husband Buys an Insurance Policy with a Face Value