A spendthrift clause in a life insurance policy would have NO effect if the beneficiary...

A spendthrift clause, permitted under Virginia Code § 38.2-3122, protects life insurance proceeds from creditors or the beneficiary’s mismanagement by restricting access to the funds. It’s effective when proceeds are paid in controlled installments (e.g., options A, B, C), as the insurer retains and distributes the money over time, preventing lump-sum dissipation. Option A (fixed amount installments) pays a set dollar amount periodically, option B (fixed period installments) pays over a set time, and option C (interest-only payments) holds the principal while paying interest—all compatible with spendthrift protection. Option D (one lump sum payment) delivers the full proceeds at once, bypassing the clause’s control mechanism, rendering it ineffective since the beneficiary gains unrestricted access. The study guide likely explains this clause as a safeguard for structured payouts, noting that lump-sum elections nullify its purpose, as seen in Virginia case law and NAIC guidelines, making D the correct choice.