A group life insurance policy contains a 'facility of payment' clause. This clause allows the insurer to:

Why A is correct

The facility of payment clause permits the insurer to pay relatively small death benefits to a person who has a reasonable claim, such as a relative or someone who paid the funeral expenses, without requiring a formal proof of claim or waiting for the named beneficiary to come forward. It is designed for administrative convenience and expediency in settling modest claims. Because the amounts involved are modest, the clause balances prompt settlement of legitimate funeral and family expenses against the insurer's need for certainty of payment, and a good-faith payment under the clause discharges the insurer's liability.

Why the other options are wrong

• B) The facility of payment clause authorizes payment to an appropriate claimant; it does not deny small claims. Refusing to pay any benefit below a threshold would be contrary to the clause's purpose of expediting payment.
• C) The employer is the policyholder under a group contract but is not the intended recipient of employee death proceeds. The clause allows payment to a family member or claimant incurring expenses, not a transfer of benefits to the employer.
• D) When a beneficiary cannot be located, the clause helps the insurer discharge the claim by paying a person with a reasonable claim, such as one who paid funeral costs. It does not void coverage for that reason.

Memory hook

Facility of payment = small claims can be settled fast with whoever reasonably paid the bills.