Which clause protects proceeds held under a settlement option from creditors?

The Spendthrift Clause is designed specifically to protect the proceeds of a life insurance policy from creditors while they are held under a settlement option. This clause restricts the ability of creditors to claim the funds, effectively safeguarding the benefits for the intended beneficiaries. It ensures that the proceeds will be managed in a way that prevents the beneficiaries from being forced to use the funds to pay off outstanding debts or claims against their estate before the funds are actually distributed to them.

The presence of this clause allows the insurance company to make payments to the beneficiaries over time (such as through annuity payments or fixed installments) rather than a lump sum, which further enhances the protection from creditors. This protection is particularly beneficial in cases where beneficiaries may face financial difficulties or if they are in a position where creditors may attempt to access their assets.

In contrast, the other clauses listed do not serve this same protective function for settlement option proceeds. An acceleration clause deals with the loan of a policy’s cash value or the ability of the insurer to force policy termination under certain conditions. A reinstatement clause often refers to the reinstatement of a lapsed policy under specific conditions, and the irrevocable clause typically relates to beneficiaries that cannot be changed without their consent. None of these clauses offer the