Proceeds from a life insurance policy are protected from the beneficiary's creditors by which clause?

• A. Spendthrift Trust Clause
• B. Incontestable Clause
• C. Grace Period Clause
• D. Nonforfeiture Clause

Answer: (A)

A spendthrift clause protects life insurance proceeds from creditor claims. This provision prevents creditors of the beneficiary from reaching the death benefit or cash value before the funds are paid out to the beneficiary, helping ensure the beneficiary actually receives the benefit. Exceptions exist (like certain taxes or alimony/child support, or if the policy is assigned as collateral), but the primary purpose is creditor protection for the proceeds.

The other clauses address different issues: the incontestable clause limits challenges to the insurer’s validity of the policy after a time, the grace period clause provides extra time to pay premiums, and the nonforfeiture clause preserves some value if premiums lapse. None of these are intended to shield proceeds from creditors.