California Life-Only & Accident and Health AgentLife InsuranceMedium
A life insurance policy states that if the insured and the primary beneficiary die in a common disaster and it cannot be determined who died first, the death benefit will be paid as if the insured outlived the beneficiary. Which policy provision or uniform act applies in this scenario?
- AUniform Simultaneous Death Act (USDA)
- BCommon Disaster Clause
- CFacility of Payment Clause
- DSpendthrift Provision
Show answer & explanationAnswer & explanation
Correct answer: A. Uniform Simultaneous Death Act (USDA)
The Uniform Simultaneous Death Act (USDA) addresses situations where the insured and the primary beneficiary die in a common disaster and survivorship cannot be determined. It presumes the primary beneficiary died before the insured, directing the proceeds to contingent beneficiaries or the insured's estate.
Why the other options are wrong
- B. A Common Disaster Clause is a specific policy provision that might be included, but the USDA is a widely adopted state law that governs such situations when specific policy language is absent or less clear.
- C. A Facility of Payment Clause allows the insurer to pay a small portion of the death benefit to a person or institution deemed equitably entitled, typically for burial expenses, and is not related to simultaneous death scenarios.
- D. A Spendthrift Provision protects beneficiaries from creditors and prevents them from assigning policy proceeds, unrelated to common disaster scenarios.
Uniform Simultaneous Death Act (USDA)
A uniform state law that addresses situations where the insured and the primary beneficiary die in a common disaster and it cannot be determined who died first. It legally presumes the primary beneficiary died before the insured.
- Applies when survivorship between insured and beneficiary cannot be determined.
- Presumes the primary beneficiary died first.
- Ensures proceeds are paid to contingent beneficiaries or the insured's estate.
- Prevents proceeds from going to the primary beneficiary's estate.
Memory trick: USDA: United Survivors Don't Argue, the law decides.