Chartered Life Underwriter Exam 2025 – 400 Free Practice Questions to Pass the Exam

The "payable on death" designation, often abbreviated as POD, indicates that upon the account holder's death, the funds or assets in the account are transferred directly to the named beneficiary without having to pass through probate. This mechanism allows for a straightforward process where the beneficiary can claim the funds immediately after the account holder’s death.

This arrangement is beneficial as it ensures that the beneficiary has immediate access to the funds, which can be crucial for covering expenses related to the deceased's passing, such as funeral costs or debts. Additionally, because the transfer occurs directly to the beneficiary and bypasses the probate process, it helps avoid potential delays and additional costs associated with that legal procedure.

The other options do not accurately reflect the implications of a payable on death designation. For instance, beneficiaries do not have to wait for a period after the account holder's death, neither does the account change to an annuity, nor does interest stop accumulating at the time of death. The essence of the POD is the immediate and direct transfer of funds to the designated beneficiary.