Texas General Lines — Life, Accident, Health and HMOTexas Statutes and Rules Specific to Life InsuranceMedium
A life insurance policy in Texas includes a 'Common Disaster Clause.' The insured and the primary beneficiary are involved in a car accident. The insured dies instantly, and the primary beneficiary dies 15 days later from injuries sustained in the same accident. There is also a contingent beneficiary named. Who will receive the death benefit?
- AThe policyowner's estate.
- BThe contingent beneficiary.
- CThe estate of the primary beneficiary.
- DThe death benefit will be split equally between the primary beneficiary's estate and the contingent beneficiary.
Show answer & explanationAnswer & explanation
Correct answer: B. The contingent beneficiary.
A Common Disaster Clause specifies a period (often 10, 15, or 30 days) during which the primary beneficiary must survive the insured to receive the death benefit. If the primary beneficiary dies within this period, it's presumed they pre-deceased the insured, and the death benefit passes to the contingent beneficiary.
Why the other options are wrong
- A. The policyowner's estate would only receive the benefit if there were no surviving primary or contingent beneficiaries.
- C. This would happen if the primary beneficiary survived the common disaster period.
- D. The clause is designed to prevent splitting and ensure the ultimate beneficiary receives the full benefit.
Common Disaster Clause
A provision in a life insurance policy that states if the insured and primary beneficiary die in the same accident, and the primary beneficiary dies within a specified period (e.g., 10-30 days) after the insured, the death benefit will be paid to the contingent beneficiary.
- Prevents proceeds from going to primary beneficiary's estate.
- Specifies a survival period for the primary beneficiary.
- Ensures contingent beneficiary receives funds.
- Part of Uniform Simultaneous Death Act principles.
Memory trick: Common disaster: If they don't last, the next in line is fast.