Facility Of Payment Clause

An insured dies with NO living beneficiary named and no facility-of-payment clause. The death proceeds are paid to:

1. A.The insurance company as forfeited fundsWrong. Insurers never keep death proceeds.
2. B.The insured's closest relative automaticallyWrong-but-tempting. Relatives take through INTESTACY of the estate - not directly from the insurer.
3. C.The state treasurer immediatelyWrong. Escheat follows ABANDONMENT - the estate exists to take.
4. D.The insured's estate, subject to probate and creditor claimsCorrect. The estate is the contractual default payee.

Why: With all designations failed, proceeds default to the insured's estate, flowing through probate where creditors reach them - the outcome sound beneficiary planning avoids. Citation: default payment provisions. Takeaway: no beneficiary alive = estate payment = probate and creditors.

An industrial life policy names no living beneficiary at the insured's death, and a modest death benefit is due. Under a FACILITY OF PAYMENT clause, the insurer may:

1. A.Retain the proceeds as insurer profitWrong. Unclaimed proceeds eventually escheat; insurers never keep them.
2. B.Donate the proceeds to a charity of its choiceWrong. No charitable-diversion authority exists.
3. C.Demand a court order before paying anyoneWrong-but-tempting. AVOIDING court process for small claims is exactly why the clause exists.
4. D.Pay the proceeds to a relative or the person who paid the funeral expensesCorrect. That equitable shortcut is the clause's purpose.

Why: These clauses, common in industrial and group policies, authorize payment to blood relatives or persons equitably entitled (such as one who paid funeral costs) when no designated beneficiary survives or can be located. Citation: facility of payment provisions in industrial/group life. Takeaway: small proceeds can bypass probate to relatives or funeral payors.