Specialized life insurance policies

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.

Survivor ship (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

Under a survivorship life insurance policy, when does the insurer pay the death benefit?

when the surviving insured dies

A "jumping juvenile" whole life insurance policy typically increases its face amount when the insured turns

age 21

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

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.

uses of survivorship life insurance

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.

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).

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.

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). 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.

uses of joint life insurance

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.

What does a family life insurance policy offer?

whole life on the primary insured and term life insurance coverage on the spouse and each child to age 21 Under a family life insurance policy, an entire family has life insurance coverage under a single policy. A family policy generally offers whole life insurance coverage on the principal insured and term coverage for the spouse and children under age 21.

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 $25,000. Generally issued in units of $1,000 of death benefit, the death benefit typically jumps to $5,000 per unit, or five times the face amount, when the insured child reaches age 21.