Life Insurance with Special Options

Special options: One policy, more than one insured
Life insurance has almost as many possible variations, options, and riders as there are companies that sell it with each offering an enticement that the company hopes will outweigh any disadvantages in premium. However, insurance that is not often suggested—partly because it covers two or more people for less money than covering each person individually and therefore pays a smaller commission—is joint life insurance and/or survivorship insurance. These policies can be either term or whole life, but are more often whole life.

Joint life insurance insures two or more people for less that the sum of the two individual policies, but is based on the average age of the two. It is most commonly issued on husbands and wives although it can also be issued on two or more business partners.

Joint Life: First to die
Joint life insurance is used when there is a need for two or more people to be protected, but the need will no longer exist when one of them dies. Thus it is paid out according to when the need will be satisfied. request rates »

An example of a "first to die" option would be if a husband and wife have a mortgage on a house, but both spouses work and have about the same income. If either spouse dies, the benefit will be paid, and the living spouse will use that money to pay off the mortgage. Once the mortgage is paid, the need for the high face value insurance no longer exists. Once the benefit is paid, the insurance itself is terminated.

Survivorship life: Second (last) to die
Survivorship life is much like joint life in that it insures two or more people for a premium based on a joint age. However, the survivorship life pays on the last death instead of the first one. Because the benefit is not paid until the last insured dies, the life expectancy is greater and therefore the premium is less. A survivorship policy would be used by business partners who might leave estate taxes on the business enterprise, or who might wish to leave the heir of business enough money to take over the business itself. go to quotes page »

Joint and survivor policies sometimes include a spendthrift clause, especially the survivor or "second to die" policies. This prevents the beneficiary from reckless spending of the benefits by requiring that the benefits be paid out over time or in fixed installments. The beneficiary cannot change the settlement option and cannot borrow or assign any of the proceeds. The spendthrift clause is a way to prevent the creditors of a beneficiary from taking the benefit to pay debts.