State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A woman names her lifelong friend, who has no financial relationship with her, as the beneficiary of her life insurance policy. This designation is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The insurable interest requirement under CIC Section 10110 applies to the policyowner in relation to the insured; the person named as beneficiary does not need an insurable interest. The statute enumerates who has an insurable interest in another's life and does not restrict who may be named as a beneficiary. Accordingly, a friend, charity, or any other person or entity may be designated to receive proceeds, so long as the policyowner has a valid insurable interest in the insured at issue. The designation is fully valid and enforceable under California law.
Why the other options are wrong
- B) Requiring the beneficiary to hold an insurable interest misstates California law. The insurable interest test under Section 10110 applies to the relationship between the policyowner and the insured, not to the person named to receive proceeds.
- C) Premium payment by the beneficiary is not a condition of a valid designation. The policyowner pays the premiums, and the beneficiary's identity is a matter of the owner's choice.
- D) There is no requirement that a beneficiary be a family member. Friends, charities, trusts, and other entities may be named, and such designations are valid as long as the policyowner holds an insurable interest in the insured.
Memory hook
Owner needs the interest, beneficiary just needs a name. Anyone can hold the bag of proceeds.