Two business partners purchase a joint life insurance policy so that when one partner dies, the surviving partner receives the death benefit. When is the benefit payable under this policy?

Why A is correct

A joint life policy, often called first-to-die insurance, insures two or more lives and pays the death benefit upon the first death among the insureds. It is commonly used in business settings, such as buy-sell or partnership arrangements, to give the surviving owner immediate cash to purchase the deceased owner's interest. The policy typically terminates after the first death has occurred. This contrasts with survivorship, or last-to-die, insurance, which pays only at the second death and is often used for estate planning purposes.

Why the other options are wrong

• Payment at the second death describes survivorship or last-to-die insurance, a different product typically used to fund estate taxes, not first-death business buyouts. Accordingly, this option is not correct because it does not match the specific rule or product that is described in the question.
• A joint life policy treats both insureds equally; the benefit is paid at the first death regardless of which insured is older or younger at the time of death. This option therefore does not match the facts presented in the question and is not the correct answer to select.
• Payment at the end of a specified term describes an endowment policy, not joint life insurance. Joint life pays when the first insured dies, not on a fixed maturity date.

Memory hook

Joint life pays on the first death; survivorship pays only on the second death.