Life & Health Insurance Exam (National Portion)Life InsuranceHard
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 primary beneficiary died before the insured. This is due to the operation of the:
- ASpendthrift Clause
- BAssignment Clause
- CCommon Disaster Clause
- DEntire Contract Provision
Show answer & explanationAnswer & explanation
Correct answer: C. Common Disaster Clause
The Common Disaster Clause (or Uniform Simultaneous Death Act, which the clause often reflects) is designed to protect the contingent beneficiaries by assuming the primary beneficiary died first in a common disaster, ensuring the death benefit goes to the contingent beneficiary rather than the primary beneficiary's estate.
Why the other options are wrong
- A. A Spendthrift Clause protects beneficiaries from creditors.
- B. An Assignment Clause allows policy ownership rights to be transferred.
- D. The Entire Contract Provision states that the policy and application constitute the entire contract.
Common Disaster Clause
A life insurance policy provision that specifies how the death benefit will be distributed if the insured and primary beneficiary die in the same accident and the order of death cannot be determined.
- Assumes primary beneficiary died first
- Ensures proceeds go to contingent beneficiary
- Prevents proceeds from going to primary beneficiary's estate
Memory trick: When disaster strikes and no one knows who died first, the Common Disaster Clause directs the money to the next in line.