South Carolina Insurance Practice Exam

Where would policy proceeds be directed if both the insured and primary beneficiary died in the same accident?

1. Estate of the insured

2. Contingent beneficiary

3. Reverted to the insurer

4. Secondary beneficiaries

The correct answer is: Contingent beneficiary

In the event that both the insured and the primary beneficiary die in the same accident, the policy proceeds would typically be directed to the contingent beneficiary. This is because contingent beneficiaries are designated to receive the benefits if the primary beneficiary is unable to do so for any reason, including predeceasing the insured. The insurance policy usually specifies a hierarchy of beneficiaries, and the contingent beneficiary steps in only when the primary beneficiary cannot claim the proceeds. This provision ensures that the benefits are distributed according to the insured's wishes as laid out in the policy, maintaining the purpose of the insurance in providing for beneficiaries in the event of the insured's death. In this scenario, directing the proceeds to the estate would not apply since the estate would only be the recipient if no beneficiaries were designated or all designated beneficiaries were deceased without any contingent beneficiaries. Similarly, the proceeds would not revert to the insurer if there are existing contingent beneficiaries, and secondary beneficiaries are generally seen as a layer below the contingent beneficiaries unless explicitly defined otherwise in the policy. Thus, the proper course of action in this situation aligns with the intention of ensuring that the benefits reach someone as designated by the insured, which is the role of the contingent beneficiary.