Final answer:
Both Anne and Andy would collect the death benefit since they were both named as joint beneficiaries and the policy went unchanged before Jeff's death.
Step-by-step explanation:
The concept of insurable interest is a fundamental principle in insurance that stipulates the policyholder must have a valid financial interest in the insured person's life. In the given scenario, despite Jeff and Anne's divorce, the fact that no changes were made to the life insurance policy is crucial in determining the entitlement to the death benefit. Insurable interest is not automatically terminated by divorce, especially when a life insurance policy is taken out before the dissolution of the marriage, and the beneficiaries remain unchanged.
In this case, since Jeff did not alter the beneficiaries post-divorce, the insurable interest persists, and the policy remains in effect for both Anne and Andy. The insurance company, bound by the terms of the policy at the time of Jeff's death, would distribute the death benefit to the joint beneficiaries, Anne and Andy. This outcome aligns with the original intent of the policy, which likely designated both individuals to receive the proceeds.
The continuation of insurable interest after divorce underscores the importance of keeping life insurance policies updated to reflect changes in personal circumstances. In the absence of modifications, the policy terms at the time of issuance or the latest update prevail, determining the distribution of benefits. This situation serves as a reminder of the enduring implications of decisions made during the policy's inception and the necessity of periodic reviews and adjustments to ensure that the coverage aligns with the policyholder's current intentions and circumstances.