CMFAS M9 Underwriting, Servicing & Claims question: Chris dies before Ben

CMFAS M9Underwriting, Servicing & Claims

Ben absolutely assigns his life policy to his brother Chris (the assignee) as a gift. Which of the following is a recognised disadvantage if Chris dies before Ben?

A The policy automatically reverts to Ben, with all the rights he had before the assignment restored
B The insurer must cancel the policy and refund all premiums to Ben without interest
C It falls into Chris's estate and passes under his will or intestacy, possibly not as intended
D Ben becomes personally liable for Chris's debts, up to the policy's surrender value

Show the answer and explanation

Answer: C. It falls into Chris's estate and passes under his will or intestacy, possibly not as intended

A key disadvantage of assignment is that if the assignee dies before the assignor, ownership falls into the assignee's estate and the policy value passes to the assignee's will or intestacy beneficiaries, which may not be what either party intended. (Divorce and bankruptcy of the assignee are the other listed disadvantages.)

Common mistake

Absolute assignment is not automatically undone by the assignee's death — the policy follows the assignee's estate, not back to the assignor.

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Related CMFAS M9 questions

A life insured dies two and a half years after the policy was issued. In assessing the claim the insurer discovers that, at application, the owner had deliberately and fraudulently concealed a serious pre-existing heart condition. Can the insurer contest the policy despite the incontestability clause?In underwriting a contributory Group Life scheme, why does the underwriter usually specify a minimum participation level (e.g. 70%–90% of eligible members)?A lapsed whole life policy that had been in force for five years is reinstated. Six months after reinstatement the life insured dies by suicide. How is the claim treated?

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Original study material mapped to the public CMFAS M9 syllabus. Unofficial, not endorsed by MAS or SCI. Verify figures and rules against current guidance before relying on them.