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 insured survived the primary beneficiary. This is an application of which uniform act or clause?
- ASpendthrift Clause
- BUniform Simultaneous Death Act
- CFacility of Payment Clause
- DCommon Disaster Clause
Show answer & explanationAnswer & explanation
Correct answer: B. Uniform Simultaneous Death Act
The Uniform Simultaneous Death Act (USDA) addresses situations where the insured and beneficiary die simultaneously or in a common disaster and it's impossible to determine who died first. It assumes the primary beneficiary predeceased the insured, ensuring the proceeds go to contingent beneficiaries or the insured's estate.
Why the other options are wrong
- A. A spendthrift clause protects beneficiaries from creditors and prevents them from assigning policy proceeds.
- C. A facility of payment clause allows the insurer to pay a small death benefit to a person who appears equitably entitled to it, often used for funeral expenses.
- D. A Common Disaster Clause is a policy provision designed to give the primary beneficiary a certain number of days (e.g., 10-30) to survive the insured, otherwise proceeds go to the contingent beneficiary. While related, the scenario specifically mentions inability to determine who died first, which is the core of the USDA.
Uniform Simultaneous Death Act (USDA)
A law adopted by most states that dictates how life insurance proceeds are distributed when the insured and the primary beneficiary die in the same event and it's impossible to determine who died first. It presumes the beneficiary predeceased the insured.
- Applies when order of death is undeterminable.
- Presumes primary beneficiary died first.
- Proceeds go to contingent beneficiary or insured's estate.
Memory trick: USDA: Undetermined, Survived, Directs to Alt.