Under California Insurance Code Section 10170(f), an insurer may use a retained-asset account as the default payment of life insurance proceeds only if:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
CIC Section 10170(f) requires that life insurance benefits be paid as a lump sum or through a settlement option clearly described in the claim form, and gives the beneficiary the right to choose how benefits are paid. A retained-asset account may be the default only when the claim form contains a prominent disclosure - in easy-to-understand language, in bold type, at least 12-point font, located where the beneficiary selects the payment method - explaining that proceeds will be placed in a retained-asset account if the beneficiary makes no choice. This protects consumers from being defaulted into an account they did not request.
Why the other options are wrong
- B) Telephone notification is not the statutory mechanism. The disclosure must appear in the claim form, not be delivered by phone.
- C) An agent's written recommendation is not sufficient. The claim-form disclosure governs the default arrangement under the statute.
- D) The insured's application selection is irrelevant to the default. The default operates at claim time based on the claim form's disclosure.
Memory hook
Retained-asset default requires a bold 12-point confession on the claim form.