What clause allows beneficiaries to receive life insurance proceeds in a manner that protects them from creditors?

The spendthrift clause is designed to protect the life insurance proceeds from creditors of the beneficiary. It ensures that the funds are distributed directly to the beneficiary and cannot be claimed by their creditors, safeguarding the financial legacy intended for them. This is particularly important in cases where the beneficiary may be facing financial difficulties or legal issues that could otherwise jeopardize their inheritance.

In contrast, settlement options refer to the various ways a policy's cash value or death benefit can be received, such as in a lump sum or through installments; this does not inherently provide protection from creditors. Nonforfeiture options pertain to rights that prevent the policyholder from losing their policy's value in certain circumstances, like non-payment of premiums, which also does not address creditor protection. Lastly, the dividend clause allows policyholders to receive dividends from participating policies but does not offer any form of protection against creditors. Thus, the spendthrift clause uniquely provides the essential protective layer around the proceeds meant for beneficiaries.