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 the same accident and it cannot be determined who died first, the policy proceeds will be paid as if the primary beneficiary died before the insured. This is an example of which uniform provision?
- ASpendthrift Clause
- BAssignment Clause
- CCommon Disaster Clause (Uniform Simultaneous Death Act)
- DIncontestability Clause
Show answer & explanationAnswer & explanation
Correct answer: C. Common Disaster Clause (Uniform Simultaneous Death Act)
The Common Disaster Clause, often based on the Uniform Simultaneous Death Act, addresses situations where the insured and primary beneficiary die in the same event and the order of death cannot be determined. 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 Spendthrift Clause protects beneficiaries from creditors by preventing them from assigning or encumbering policy proceeds.
- B. The Assignment Clause allows the policyowner to transfer ownership rights to another party.
- D. The Incontestability Clause prevents the insurer from denying claims after a certain period, usually two years, due to misstatements on the application.
Common Disaster Clause (Uniform Simultaneous Death Act)
A life insurance policy provision or state law that specifies how policy proceeds will be distributed if the insured and primary beneficiary die in the same event and the order of death cannot be determined.
- Presumes primary beneficiary died before the insured
- Ensures proceeds go to contingent beneficiary or insured's estate
- Prevents proceeds from going to the primary beneficiary's estate
Memory trick: When disaster strikes, the 'common' rule decides who gets the cash.