California Life-Only & Accident and Health AgentLife InsuranceMedium
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. Which provision or act governs this scenario?
- ACommon Disaster Clause
- BUniform Simultaneous Death Act (USDA)
- CFacility of Payment Clause
- DSpendthrift Clause
Show answer & explanationAnswer & explanation
Correct answer: B. Uniform Simultaneous Death Act (USDA)
The Uniform Simultaneous Death Act (USDA) addresses situations where the insured and primary beneficiary die simultaneously or in a common disaster without clear evidence of who died first. It assumes the beneficiary predeceased the insured, allowing the death benefit to pass to the contingent beneficiary or the insured's estate.
Why the other options are wrong
- A. While related to the scenario, the 'Common Disaster Clause' is often a specific policy provision that mirrors the intent of or is derived from the USDA.
- C. A Facility of Payment Clause allows the insurer to pay a small portion of the death benefit to a person or institution that has incurred burial expenses or medical costs, usually for small policies.
- D. A Spendthrift Clause protects beneficiaries from creditors and prevents them from assigning policy proceeds.
Uniform Simultaneous Death Act (USDA)
A law that provides a legal presumption regarding the order of death when an insured and a primary beneficiary die in a common disaster and the order of death cannot be determined, typically assuming the beneficiary died first.
- Applies to common disaster/simultaneous death
- Assumes beneficiary died before insured
- Directs proceeds to contingent beneficiary or estate
Memory trick: USDA: If they die together, the beneficiary is 'dead first' to protect the contingent.