Spendthrift clause in life insurance serves to

• A. Limit the beneficiary's control over proceeds
• B. Increase policy cash value
• C. Enable assignment of policy
• D. Reduce premium rates

Answer: (A)

A spendthrift clause is about controlling how the death benefit is paid out, protecting it from being squandered or claimed by creditors. It typically limits the beneficiary’s immediate access to the proceeds by requiring that the funds be held in trust or paid out in installments rather than as a single lump sum. This helps prevent reckless spending and shields the benefit from the beneficiary’s creditors, ensuring the money lasts for its intended purpose.

So the clause best serves to limit the beneficiary’s control over the proceeds, rather than affecting policy cash value, enabling assignment, or changing premium rates.