Texas General Lines — Life, Accident, Health and HMOLife InsuranceMedium
A life insurance policy states that if the insured and the primary beneficiary die in a common disaster, it will be assumed that the primary beneficiary died before the insured, unless there is proof otherwise. This provision is designed to protect the contingent beneficiary. What is this provision called?
- ASimultaneous Death Provision
- BCommon Disaster Clause
- CReinstatement Clause
- DSpendthrift Clause
Show answer & explanationAnswer & explanation
Correct answer: A. Simultaneous Death Provision
The Simultaneous Death Provision (often based on the Uniform Simultaneous Death Act) states that if the insured and primary beneficiary die in the same accident and it's impossible to determine who died first, it will be assumed that the primary beneficiary died before the insured. This ensures the death benefit passes to the contingent beneficiary, preventing it from going into the primary beneficiary's estate.
Why the other options are wrong
- B. While related to a common disaster, 'Common Disaster Clause' is a less precise term than Simultaneous Death Provision, which specifically addresses the order of death presumption.
- C. Reinstatement clause allows a lapsed policy to be put back in force, unrelated to beneficiary succession.
- D. Spendthrift clause protects proceeds from the beneficiary's creditors, unrelated to simultaneous death.
Simultaneous Death Provision
A life insurance policy clause that, in the event of a common disaster where the insured and primary beneficiary die simultaneously, presumes the primary beneficiary died first.
- Prevents proceeds from going into the primary beneficiary's estate.
- Ensures proceeds are paid to the contingent beneficiary.
- Often based on the Uniform Simultaneous Death Act (USDA).
Memory trick: Simultaneous Deaths: Safeguard the Successor