Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceMedium
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 policy proceeds will be paid as if the primary beneficiary died before the insured. Which clause or act is being applied?
- ASpendthrift Clause
- BReinstatement Clause
- CIncontestability Clause
- DCommon Disaster Clause
Show answer & explanationAnswer & explanation
Correct answer: D. Common Disaster Clause
The Common Disaster Clause (or Uniform Simultaneous Death Act) specifies that if the insured and primary beneficiary die in the same accident and it's unclear who died first, the primary beneficiary is presumed to have died first, ensuring the proceeds go to the contingent beneficiary or the insured's estate.
Why the other options are wrong
- A. The Spendthrift Clause protects beneficiaries from creditors.
- B. The Reinstatement Clause allows a lapsed policy to be put back in force under certain conditions.
- C. The Incontestability Clause prevents the insurer from denying claims after a certain period, usually two years.
Common Disaster Clause / Uniform Simultaneous Death Act (USDA)
A provision in a life insurance policy or state law that dictates how proceeds are distributed if the insured and primary beneficiary die in the same accident and the order of death cannot be determined.
- Presumes primary beneficiary died first
- Ensures proceeds go to contingent beneficiary or estate
- Prevents proceeds from being paid to primary beneficiary's estate
- Typically applies if deaths occur within a short period (e.g., 30-90 days)
Memory trick: Clauses are policy rules, guiding how things happen.