A life insurance policyowner has named their spouse as the primary beneficiary and their child as the contingent beneficiary. If both the policyowner and the spouse die in a common accident, and it cannot be determined who died first, how will the policy proceeds be distributed?
- AThe proceeds will be paid to the child as the contingent beneficiary.
- BThe proceeds will be paid to the spouse's estate.
- CThe proceeds will be paid to the policyowner's estate.
- DThe proceeds will be held by the insurer until a court determines the order of death.
Show answer & explanationAnswer & explanation
Correct answer: A. The proceeds will be paid to the child as the contingent beneficiary.
In common accident scenarios where the primary beneficiary and insured die simultaneously or it cannot be determined who died first, the Uniform Simultaneous Death Act (or similar state law) presumes the primary beneficiary died first. This means the proceeds would then go to the contingent beneficiary, if named and alive, as if the primary beneficiary had predeceased the insured.
Why the other options are wrong
- B. This would happen if the spouse was clearly determined to have survived the insured, even briefly, or if there was no contingent beneficiary and the presumption of simultaneous death didn't apply.
- C. This would happen if no beneficiary (primary or contingent) was alive or could be determined, causing the proceeds to revert to the estate of the insured.
- D. While a court *could* be involved in complex cases, the Uniform Simultaneous Death Act provides a legal presumption to avoid this exact scenario, directing the payout to the contingent beneficiary.
Uniform Simultaneous Death Act
A state law that provides a legal presumption for the order of death when an insured and a primary beneficiary die in the same accident and the order of death cannot be determined. It presumes the primary beneficiary died first, allowing proceeds to go to contingent beneficiaries.
- Applies when order of death is unclear.
- Presumes primary beneficiary died first.
- Directs proceeds to contingent beneficiary or insured's estate.
- Prevents proceeds from going to primary beneficiary's estate.
Memory trick: Who gets the money? Primary, then Contingent, unless a common accident makes it tricky.