A life insurance policy states that if the insured and the primary beneficiary die in a common accident and it cannot be determined who died first, the primary beneficiary will be presumed to have died before the insured. This provision is based on which of the following?
- AIncontestability Clause
- BSpendthrift Clause
- CGrace Period
- DUniform Simultaneous Death Act (USDA)
Show answer & explanationAnswer & explanation
Correct answer: D. Uniform Simultaneous Death Act (USDA)
The Uniform Simultaneous Death Act (USDA) is a law, often incorporated into life insurance policies, that dictates how death benefits are distributed when the insured and beneficiary die simultaneously and it's impossible to determine who died first. It presumes the beneficiary died first, allowing the proceeds to go to the contingent beneficiary or the insured's estate.
Why the other options are wrong
- A. The incontestability clause prevents the insurer from denying a claim after a certain period due to misstatements.
- B. A spendthrift clause protects the beneficiary's proceeds from creditors.
- C. A grace period allows extra time to pay a premium before policy lapse.
Uniform Simultaneous Death Act (USDA)
A law (or policy provision based on it) that applies when the insured and primary beneficiary die in the same accident and it's impossible to determine who died first. It presumes the primary beneficiary died before the insured, allowing the death benefit to go to the contingent beneficiary or the insured's estate.
- Applies to common disaster scenarios
- Presumes primary beneficiary dies before insured
- Ensures proceeds bypass the primary beneficiary's estate
- Allows proceeds to go to contingent beneficiary
- Prevents unnecessary probate and taxation in the primary beneficiary's estate
Memory trick: Simultaneous Death: USDA presumes the beneficiary is deceased first.