Texas General Lines — Life, Accident, Health and HMOLife InsuranceEasy
A life insurance policy states that if the insured and 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 survived the primary beneficiary. This provision is known as the:
- AReversionary Beneficiary Clause
- BCommon Disaster Clause
- CUniform Simultaneous Death Act
- DSpendthrift Clause
Show answer & explanationAnswer & explanation
Correct answer: B. Common Disaster Clause
The Common Disaster Clause (or provision) is designed to protect the contingent beneficiaries. If the insured and primary beneficiary die in the same accident and it's unclear who died first, this clause assumes the insured survived the primary beneficiary, thus allowing the proceeds to go to the contingent beneficiary or the insured's estate.
Why the other options are wrong
- A. A Reversionary Beneficiary is a type of contingent beneficiary, not a clause governing order of death.
- C. The Uniform Simultaneous Death Act is a state law, while the Common Disaster Clause is a policy provision that often extends the time frame for assumption of survival beyond immediate simultaneous death.
- D. The Spendthrift Clause protects beneficiaries from creditors.
Common Disaster Clause
A life insurance policy provision that specifies how the death benefit will be paid if the insured and primary beneficiary die in a common accident and the order of death cannot be determined.
- Assumes insured survived primary beneficiary.
- Protects contingent beneficiaries.
- Prevents proceeds from going to primary beneficiary's estate.
Memory trick: Common Disaster: If both go, next in line will know.