A husband and wife purchase a joint life policy. The policy pays the death benefit when the first of the two insureds dies. What is the most likely purpose of this design?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A joint life policy insures two lives under one contract and pays the face amount upon the first death of the two insureds. The most common purpose is to provide immediate liquidity to the surviving spouse — replacing lost income, paying off debts, or covering final expenses at the moment the family's financial need arises. Because only one benefit is payable (on the first death), the premium is lower than the cost of two individual policies. This is the opposite design of a survivorship policy, which pays only on the second death and is typically used for estate tax liquidity.
Why the other options are wrong
- B) Funding estate taxes at the second death is the purpose of a survivorship (last survivor) policy, which pays on the second death. A joint life policy pays on the first death and is used for survivor liquidity, not estate tax timing.
- C) Joint life pays the face amount on the first death of the two insureds. Premium refunds are a return-of-premium feature unrelated to joint two-life designs, which do not refund premiums.
- D) Joint life is not an insurability guarantee for retirement. Guaranteed insurability is a rider allowing the insured to purchase additional coverage at specified times without new evidence of insurability.
Memory hook
Joint life = first to fall triggers the check. Two lives, one payout, immediate cash for the survivor.