Facility of Payment Clause


Definition - What does Facility of Payment Clause mean?

A facility of payment clause is a provision in life insurance that allows the insurance company to choose the beneficiary or give part of the proceeds to someone other than the beneficiary. It can also be used to pay for expenses related to the insured, the most common being funeral expenses.

Insuranceopedia explains Facility of Payment Clause

When a facility of payment clause exists in life insurance (it is not always included), the power of distribution regarding insurance money is either partly or wholly given to the insurance company. The company may have the choice of giving the entire death benefit to a relative of the insured, for instance, after his or her death because the official beneficiary is a minor or is also deceased. The most common use of this clause is the insurance company paying off expenses related to the death of the insured, such as funeral expenses. This kind of payout eases the legal expenses of the estate since it no longer facilitates asset distribution and instead turns it over to the insurance company.

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