Many people don’t know much about life insurance. Those that do may only think of life insurance as being for an individual, but life insurance is much more flexible than people perceive it to be . Life insurance can be written on one, two, or more people depending on the needs of the insured. Two of the main types of life insurance policies where more than one individual are insured are called Joint Life and Survivorship.
Joint Life Policies
Joint Life policies have been created as a way to structure a whole life, endowment or term contract for either partners in a business venture or husbands and wives. A joint life policy is payable upon the death of any one of the individuals who are insured. Therefore the policy will pay off when the first of the insured individuals dies. Once one of the insured individuals has died the policy will terminate. Many Joint Life policies will have an option to provide the surviving party with the opportunity to purchase individual insurance on themselves without evidence of insurability, granted this option to insure must be made within a specified period normally no more than 60-90 days.
The purpose of a Joint Life policy is to bring relief to the surviving party. In a marriage this is meant to protect the husband or wife from financial hardships following the death of their loved one. In business Joint Life policies may be used to protect business partners from the loss of a key employee or to fund a buy sell agreement.
Survivorship Life Policies
Survivorship Life insurance is comparative to Joint Life in that the life insurance is written on two or more individuals. The main difference between the two though is that Survivorship Life pays out its face amount upon the death of the last surviving insured. The main purpose for Survivorship Life is to pass on funds to the policies beneficiaries so they can pay estate taxes. This is especially important to husband and wives who want to protect there family estate from having to sell assets to pay taxes. Another benefit of Survivorship Life is that the premiums are usually lower than when the policy is on any one insured as the risk of mortality is spread between two parties.
Joint Life and Survivorship Life policies are an important tool to consider when preparing an estate plan and they may provide valuable protection to both your spouse and family. It is important to consult with a qualified estate planner when considering these policies.