Specialized Life Insurance Policies

Joint (First-to-Die) Life Insurance

Joint life insurance is permanent coverage that insures two persons under one policy. The policy pays the death benefit when the first insured dies. The main appeal of this policy approach is cost. Specifically, the premium is less than it would be for two separate policies providing the same death benefit. When the first insured dies under a joint life policy, the surviving insured has a conversion right that allows the survivor to buy an individual policy with the same or a lesser face amount. Moreover, the surviving insured does not have to prove insurability.

Specialized Policies for Family Needs

Life insurance companies have specialized policies for families and their unique needs when a wage earner dies. These policies combine both whole life and term insurance into policies that provide both a lump-sum death benefit and a stream of income for a period of time following the insured's death. They provide additional coverage during the child-rearing years, when the need for financial resources is especially crucial. --lump-sum= receive insurance payout in a single sum

Common Uses of Survivorship Life

Survivorship life is especially popular in the estate planning market. Married couples use these policies to create a sum of money that will be needed when the second spouse dies (which is when estate taxes and other estate settlement costs are due). Because estate planning involves large numbers, second-to-die policies are issued in high amounts, often for as much as $1 million or more. Aside from this use, second-to-die policies can be used in both the personal and business marketplace anytime the death benefit is most needed when the second insured dies

Common Uses of Joint Life

These two features—a death benefit paid upon the first death and the survivor's ability to buy a comparable policy—makes joint life insurance especially popular in the business insurance market (especially when it involves business partnerships). A joint policy is particularly relevant in business partnerships. Here, such a policy provides funds for the surviving partner to buy out the deceased partner's share of the business. In addition, the policy provides funds for certain family insurance needs. For example, families with two working parents often purchase this policy.

Key points

-Family income policies use decreasing term to fund a potential income period that decreases as the policy ages. -Family maintenance policies use level term insurance to maintain income for a level period of time from the time of death.

Family Income Policies

A family income policy is a life insurance policy that combines whole life insurance and decreasing term life insurance on the insured, typically the family's main wage earner. Period for the payment of term portion of the death benefit begins when the contract is issued. The decreasing term insurance portion of the policy pays a specified monthly income to a specified date if the insured dies prior to that date. The income benefit period is usually 5, 10, 15, or 20 years from the date of policy issue. If the insured is alive at the end of the term life period, the monthly income portion of the benefit vanishes. The whole life death benefit protection remains. Family income policies use decreasing term to fund a potential income period that decreases as the policy ages. If the insured dies during the income benefit period, the lump-sum death benefit is paid out at the end of the income period. If death occurs after the end of the income benefit period, the death benefit is paid out immediately. Family income policies are issued with income benefits defined in terms of *monthly income unit.* The monthly income is defined in terms of $10 for every $1,000 of whole life coverage.

Family Maintenance Policies

A family maintenance policy is similar to a family income policy, with a big difference in the length of time the income benefit is provided. Both provide a lump-sum benefit and an income that is funded by a term rider attached to a whole life policy. The difference between the two types of coverage lies in the length of time the monthly income is paid following the insured's death during the term of coverage. Family maintenance policies use level term insurance to maintain income for a level period of time from the time of death. For example, if the insured with a 20-year family maintenance policy dies within the income benefit period, monthly income payments will be made to the beneficiary for 20 years. The whole life death benefit is paid immediately upon the insured's death (not at the end of the income period, as is done with a family income policy= policy that cimbines whole life insurance and deceasing term life insurance on a named insured).

Family (Family Protection) Policies

A family protection policy is one in which the entire family receives life insurance coverage under a single policy. Slightly different variations exist, but a family policy generally provides -whole life insurance coverage on the principal insured; -term life insurance coverage on the spouse to age 65; and -term life insurance coverage on each child to age 21. Term insurance on a child can usually be converted without proof of insurability when the child turns 21. Family policies are sold with various face amounts. Coverage is sold in units. The typical family policy providing one unit of coverage provides -$5,000 of whole life insurance coverage on the principal insured; -$2,000 of term life insurance coverage on the spouse; and -$1,000 of term life insurance coverage on each child.

Survivorship (Second-to-Die) Life Insurance

Another form of dual-insured life insurance is appropriately called survivorship life insurance (or second-to-die life insurance) because these policies pay the death benefit only when the second insured dies. As with joint life, survivorship life premiums are lower than they would be for two comparable single-life policies.

Specialized Life Insurance Policies

Category of life insurance policy characterized not by the policies' design or features but by the purpose for which these policies are written. This category of life insurance policy includes joint life insurance, survivor-ship policies, juvenile life insurance, and life insurance for family uses and needs. tpyes= -joint life (2 or more on one policy. one premium. pays after first insured dies) -Survivorship (2 or more. pays out when second person dies) -juvenile (term or permanent insurance from birth to ages 15-16.) -family (covers entire family and provides income to the family if the primary income earner dies.) -Two types of family policies: --family income policy (whole and decreasing term)- the term period begins when the contrast is issued. --Family maintenance policy (whole and level term)- The term period begins when the insured dies.

Juvenile Life Insurance

Life insurance of any type can be written on the lives of children of any age, beginning at one day old. When the child is under age 15 (16 in Canada), an adult (parent, grandparent, or guardian) must be the applicant and owner of the policy insuring the minor. The adult policyowner is responsible for paying the premiums. A special type of whole life insurance has been created for the juvenile market. Known as *jumping juvenile life insurance (or juvenile estate builder)*, it features low premiums and a death benefit that increases when the child becomes an adult. Because the insured is so young when the policy is issued, the premiums are relatively small and remain level for the insured's life. *Typically issued in units of $1,000 of death benefit, the death benefit jumps to $5,000 per unit when the insured child reaches age 21*. However, the premium does not change nor is proof of insurability required. Jumping juvenile policies are typically designed to be paid up at the insured's age 65. The "jump up" at age 21 recognizes the need for more protection when the child becomes an adult. Juvenile insurance is a way to provide a child with long-term extremely affordable whole life insurance protection

quiz

Question 1 Nicole, age ten, is the insured in a traditional "jumping juvenile" policy with a $5,000 face amount. When she reaches age 21, what will most likely happen to the juvenile policy's face amount? It will increase to $20,000. It will increase to $10,000. It will remain $5,000. *It will increase to $25,000. A jumping juvenile policy is typically issued in units of $1,000 of death benefit. When the insured child reaches age 21, the death benefit jumps to $5,000 per unit. The death benefit under Nicole's policy will increase to $25,000 when she reaches age 21. Question 2 Jack bought a life insurance policy to make sure his surviving family members would have an income for ten years if he died prematurely. Five years after purchasing the policy, Jack died. Beginning with the date of his death, the policy began paying a level monthly benefit to his family for ten years. What type of policy did Jack buy? survivorship life insurance policy ten-year family income policy *ten-year family maintenance policy ten-year family protection policy Jack bought a ten-year family maintenance policy. Under this type of policy, the period for paying the term portion of the death benefit begins when he dies. Question 3 A "jumping juvenile" whole life insurance policy typically increases its face amount when the insured turns age 18. age 16. age 26. *age 21. Typically issued in units of $1,000 of death benefit, the death benefit jumps to $5,000 per unit when the insured child reaches age 21. Question 4 What is the main appeal of joint life insurance? ability to cover an entire family renewal feature higher death benefit *lower cost than two separate policies. The main appeal of joint life insurance is its lower cost. The premium is less than it would be for two separate policies offering the same death benefit Question 1 Which statement about survivorship life insurance policies is NOT correct? They are also known as second-to-die policies. They pay the death benefit only when the second insured dies. They insure two persons under one policy. *The premiums are about the same as for two comparable single-life policies. The premiums for survivorship life insurance are lower than they would be for two comparable single-life policies because more than one person is insured on one policy. Question 2 Which of the following is the main appeal of joint life insurance compared to two separate policies? *lower cost higher death benefit for the same premium as an individual policy. ability to cover an entire family renewal feature The main appeal of joint life insurance is its lower cost. The premium is less than it would be for two separate policies offering the same death benefit. Question 3 How does a family income policy differ from a family maintenance policy? *A family income policy combines whole life insurance with decreasing term, while a family maintenance policy combines whole life and level term insurance. A family income policy combines whole life insurance with an increasing term insurance, while a family maintenance policy combines whole life and decreasing term. A family income policy combines whole life insurance with increasing term insurance, while a family maintenance policy combines whole life and level term insurance. A family income policy combines whole life insurance with level term insurance, while a family maintenance policy combines whole life and decreasing term. A family income policy combines whole life insurance and decreasing term life insurance. A family maintenance policy combines whole life insurance with level term insurance. Question 4 Which of the following statements regarding joint life insurance and survivorship life insurance is NOT true? Both joint life and survivorship life have a lower premium than two comparable individual policies covering the two insureds. *Joint life insurance is especially popular in the estate planning market. Joint life insurance includes a conversion provision that lets the surviving insured purchase an individual policy without having to prove insurability upon the first insured's death. Survivorship life insurance pays the death benefit upon the death of the second insured. Joint life insurance, popular in the business market and with spouses looking for a lower-cost alternative to two policies, pays the death benefit upon the death of the first insured. Survivorship life, popular in the estate planning market, pays the death benefit upon the death of the second insured.

for test

Family income policy and family maintenance policy both have a permanent life insurance policy (lump sum death benefit for whatever purpose) and a term life insurance policy on the side as a rider (provides for income in event of the insurers death; provides stream of income to the survivors). Difference of two; -Family income policy is based on a decreasing term writer to fund income (as time goes on the policy will have less money available to provide a stream of income) Issued with a date in the future that will be the ending date of income if the insurer dies in between now and that date. If you have a 20 yr plan. You die on year 12. 8 yrs of income will be paid out. 20-12=8 It ends on a specific date. -Family Maintenance policy uses a level term writer (same amount of money whenever death occurs for stream of income) Provides income for a specified period of time after death. If you have a 20 yr policy and die within the 20 yr policy they get 20 yrs of income after your death. Maintains the same amount of worth over time.