Simultaneous Death and Life Insurance Proceeds

Beneficiary designations are pretty clear in life insurance policies. Basically, if you have life insurance and you pass on, the proceeds from your policy go to your designated primary beneficiary. This could be your spouse, your child, or close friend, etc. But what happens if you, and your primary beneficiary, pass away at the same time? This may sound far-fetched, but it is definitely possible. For example, if you named your spouse as your beneficiary and you both wind up getting killed in a car accident.

If both you and your beneficiary die at the same time, it can create problems. To avoid these difficulties, many states have adopted a law known as the Uniform Simultaneous Death Act. Under this Act, if there’s no clear evidence of who died first – you or your beneficiary – then your life insurance policy is distributed as though you survived the beneficiary. This means the life insurance proceeds would go to your estate and not the estate of your beneficiary.

However, if contingent beneficiaries are designated in the policy, the life insurance proceeds could go to them. Nevertheless, if clear evidence exists that your primary beneficiary survived you, then the life insurance proceeds would go to the beneficiary’s estate, according to finweb.com.

Here’s an example:

John and Jane are married. John has a life insurance policy and Jane is the primary beneficiary. Their children, Bobby and Cindy, are listed as contingent beneficiaries. Tragically, John and Jane die in a multi-vehicle auto wreck. If, after the accident, Jane survived longer than Jim, she would be entitled to the life insurance policy proceeds and they would be paid to her estate. The proceeds would then go to the designated beneficiaries in her will (or, if she has no will, in accordance with state intestacy laws). Conversely, if John survived longer than Jane, the contingent beneficiaries listed in the life insurance policy, Bobby and Cindy, would receive the life insurance proceeds. If no contingent beneficiaries were listed, the proceeds would go to John’s estate and his will would designate who receives the proceeds (again, if John didn’t have a will, state intestacy laws would govern).

You may be asking, “what if it’s impossible to determine who lived longer?” Well, the Uniform Simultaneous Death Act has a provision addressing this scenario. The Act 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 life insurance policy proceeds are paid as if the primary beneficiary died first. Basically, this means that the life insurance proceeds are paid to any named contingent beneficiaries or the insured’s estate. However, if there is any kind of available proof, like a witness who said that they saw the beneficiary move or show any other signs of life after an accident, then it will be determined that the primary beneficiary outlived the insured and the life insurance proceeds will be paid to the beneficiary’s estate.

Is there a way to avoid these types of complications and even having to deal with the Uniform Simultaneous Death Act? Yes. You can include a Common Disaster Provision in your life insurance policy. Such a provision would ensure that the rights and interests of any contingent beneficiaries are protected in the event of a simultaneous death. You can write into your life insurance policy that the primary beneficiary must outlive you, the insured, for a specified length of time in the event of simultaneous death. If that doesn’t happen, the life insurance proceeds are paid to your contingent beneficiary or beneficiaries.

For more information about the simultaneous death issues, check out this blog I wrote regarding the simultaneous death provisions in D.C., Maryland and Virginia.