Beneficiaries and the Uniform Simultaneous Death Act

Generally speaking, beneficiary designations are quite unambiguous in a life insurance policy. When an insured individual dies, the policy proceeds go to the primary beneficiary. But what happens if the insured and the primary beneficiary both die at the same time? This can create complex problems. To avoid these difficulties, many states have adopted the Uniform Simultaneous Death Act. Under this legislation, if there's no clear evidence as to who died first, the policy is settled as though the insured survived the beneficiary, and the life insurance proceeds would hence be paid to the estate of the insured, and not the estate of the beneficiary. Of course, if contingent beneficiaries are designated, the proceeds would necessarily go to them. However, if clear evidence exists that the primary beneficiary survived the insured, then the proceeds would be payable to the beneficiary's estate.

As an example, let's assume that Jim and Joan are a married couple, with Jim having an insurance policy on his life and Joan being the primary beneficiary. Their children, Billy and Susan, are the contingent beneficiaries. Unfortunately, Jim and Joan are killed in a car accident. If, after the accident, Joan survived a little longer than Jim, she would be entitled to the policy proceeds and they would be paid into her estate. The money would then go to any people designated in her will (or, if she has no will, in accordance with prevailing state intestacy laws). On the other hand, if Jim survived longer than Joan, the contingent beneficiaries, Billy and Susan, would receive the proceeds. If there were no contingent beneficiaries, the proceeds would go to Jim's estate, and his will would then designate who should receive the money (again, if no will existed the state intestacy laws would control the funds' disposition).

As a purely practical matter, however, it's often impossible to determine whether one person outlived another in a situation such as this. The Uniform Simultaneous Death Act addresses this type of problem. It basically states that if the insured and primary beneficiary both die in the same accident and there's no proof that the beneficiary actually outlived the insured, the policy proceeds are paid as if the primary beneficiary died first. In other words, the proceeds are paid to any named contingent beneficiaries, or into the insured's estate if no contingent beneficiaries are designated. But if there is any kind of available proof – such as a witness stating that he or she saw the primary beneficiary move and thus show signs of life, after an accident that ultimately kills both the beneficiary and the insured – then the primary beneficiary outlived the insured and the money must be paid to the beneficiary's estate.

However, this situation, too, can produce complications. There are times when it's most advantageous for all concerned to avoid the problem of the primary beneficiary living only a short time longer than the insured and receiving the proceeds of the insurance policy. A Common Disaster Provision can be used to remedy this dilemma. With this clause the policyowner can ensure that the rights and interests of any contingent beneficiaries are protected. It simply writes into a policy (by request of the policyowner) that the primary beneficiary must outlive the insured for at least a specified length of time in the event of simultaneous (or nearly simultaneous) death, or the proceeds are paid to the contingent beneficiary. The specified time period that the primary beneficiary must survive in order to receive the proceeds is typically ten, fifteen or thirty days. This provision comes into play most frequently when the insured and the primary beneficiary are killed in (or die as a result of) a common disaster, which is the reason that it's so named.

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