What are Joint and Survivorship Insurance Policies?

Thursday, February 4, 2010

Both types of insurance are extremely valuable when it comes to estate planning after death. They are generally used to insure the lives of two or more people under a single policy. These types of policies are generally used to protect a large estate or to guarantee the payment of one’s debt in business terms. It is usually less expensive to use one of these policies as opposed to taking out two individual policies.


What the Difference?

Joint Life Insurance Policies: these are also commonly known as first to die policies. In effect, they serve to provide payment to either spouses or business partners. Generally they pay when the first person in the policy dies. This will make sure that, in the event of death, those left behind will not be saddled with debt, whether it be personal or professional.

Survivorship Life Insurance: These are most commonly known as second to die policies and are often taken out by couples with sizeable assets. These make sure that the lion’s share of their inheritance actually makes it to where it’s meant to go and is not used to pay taxes and business debts.

Advantages

If written as a whole life policy it will actually build cash value, as premiums are paid.

These policies are generally less particular when it comes to the underwriting process and can be very effective in insuring someone who would otherwise be seen as high risk.

Joint and survivor polices will almost always have lower premiums than if taking out two individual policies.


Disadvantages

Joint and survivor policies are not easy to change once the underwriting process is complete. This means that premiums can’t really be changed in most cases.

The younger or healthier person in the policy will usually pay more, as premiums are calculated according to an average of all people involved.


In Summary

Joint life insurance policies are often recommended in business contexts so that in the event of one partner’s passing then they are assured funds that will enable the business to continue operating.

Survivor life insurance policies are generally recommended in cases where inheritance is not needed immediately by their heirs in order to protect family assets.


Julia Penney