If two partners own life insurance on each other's lives and name each other as beneficiaries, who receives the policy proceeds when one partner dies?

• A. Tom
• B. Bob
• C. The estate
• D. The policy owner

Answer: (A)

The main idea is that life insurance proceeds go to the beneficiary named in the policy. If two partners each buy policies on the other’s life and name the other partner as the beneficiary, then when one partner dies the named beneficiary—the surviving partner—receives the payout. The estate wouldn’t receive the funds, unless there was no valid beneficiary designation or no contingent beneficiary in place. Ownership of the policy doesn’t by itself determine who gets the money—the beneficiary designation does. So, the surviving partner receives the policy proceeds.