The purpose of the delayed payment clause in a life insurance policy is to

• A. assure the availability of the marital deduction for the beneficiary.
• B. allow the beneficiary time to plan the best tax strategy for handling the death benefit.
• C. avoid paying the proceeds into the estate of a beneficiary who survived the insured for only a few days.
• D. permit the insurer to retain the proceeds as long as possible.

Answer: (C)

The idea behind a delayed payment clause is to manage what happens to the death benefit when a named beneficiary outlives the insured only by a very short period. By holding the proceeds for a short, defined waiting period after the insured’s death, the insurer can confirm survivorship and prevent the money from flowing into the beneficiary’s probate estate if that beneficiary dies soon after. In practice, if the named beneficiary dies within that window, the benefit doesn’t automatically become part of that beneficiary’s estate; instead it’s redirected according to the policy’s terms (often to a contingent beneficiary or another designated recipient). This helps ensure the funds go to the intended person or group and avoids probate complications or unintended tax issues tied to a rapidly deceased beneficiary.