West Virginia State Life Insurance Practice Exam

The common disaster clause provides that if both the insured and the sole name beneficiary were to die in a common accident, which of the following is true?

1. The insurance proceeds go to a secondary beneficiary

2. The insured's estate receives the payment of proceeds

3. The proceeds are divided among the relatives

4. The policy is voided

The correct answer is: The insured's estate receives the payment of proceeds

The common disaster clause is a specific provision found in many life insurance policies designed to address situations where the insured and the beneficiary die simultaneously in a common accident. The purpose of this clause is to prevent any complications regarding the distribution of the death benefits. When both parties die at the same time, typically, the law operates under the assumption that the beneficiary predeceased the insured. As a result, the insurance proceeds do not go directly to the beneficiary but instead are paid out according to the terms of the policy if there is a contingent, or secondary, beneficiary named. If no secondary beneficiary is designated, the proceeds will be paid to the estate of the insured. Having this structure in place avoids confusion and legal complications about the order of death and ensures that the insured's estate receives the benefits, which can then be distributed according to the deceased's will or state law. This is why the selected answer is accurate. The specific outcome ensures the integrity and clarity of the insurance payout in the event of a tragic accident involving both the insured and the primary beneficiary.