What is true about the payment of proceeds to a minor beneficiary?

The correct answer highlights that minors are not legally able to enter into binding contracts, including signing receipts for funds. This is an important point in life insurance practices because it reflects the legal limitations placed on minors in financial matters. Generally, a minor lacks the legal capacity to manage or consent to transactions, which includes receiving life insurance proceeds.

When it comes to life insurance policies where minors are designated as beneficiaries, this limitation means that an adult, such as a parent or guardian, typically needs to manage those proceeds on behalf of the minor until they reach the age of majority. This ensures that the funds are appropriately handled and that the minor's best interests are protected until they are old enough to manage the funds themselves.

In contrast, proceeds are not typically paid directly to minors nor can insurers dispense funds without restrictions. This approach safeguards the interests of both the minor and the insurance company, as the latter requires an adult to hold responsibility for the funds.