When is the face amount paid under a Joint Life and Survivor policy?
The Correct Answer Is:
c. upon the death of the last insured
Correct Answer Explanation: c. upon the death of the last insured
The correct answer is c. upon the death of the last insured. In a Joint Life and Survivor policy, the face amount is paid out when the last of the insured individuals passes away.
This type of policy is designed to provide financial protection for a couple, typically spouses, and the death benefit is intended to support the surviving spouse after the loss of the second insured.
Upon the death of the last insured, the policy reaches its maturity, and the insurance company disburses the face amount to the designated beneficiaries. The rationale behind this approach is to ensure that the surviving spouse has financial security and support after the death of their partner.
Now, let’s delve into why the other options are not correct:
a. When the policy reaches maturation:
Joint Life and Survivor policies differ from traditional life insurance policies in that they lack a fixed maturation date. These policies are structured to cover the lifetimes of the insured individuals, and the death benefit is specifically tied to the survival status of the last insured.
The primary purpose of this insurance is to provide financial protection for both individuals in a couple until the death of the last surviving partner. As a result, waiting until the policy reaches maturation is not a condition for the payout.
b. Upon the death of the first insured:
Joint Life and Survivor policies explicitly specify that the face amount is paid out upon the death of the last insured. This is a crucial distinction from traditional Joint Life policies, where the death benefit is triggered by the demise of the first insured.
In the Joint Life and Survivor policy, the intention is to support the surviving spouse financially until their passing. Paying out the face amount upon the death of the first insured would not align with the design and purpose of this particular type of insurance.
d. When one of the insureds becomes disabled and no longer able to make premium payments:
Disability is generally not a trigger for the payout of the face amount in a Joint Life and Survivor policy. These policies are specifically structured to provide a death benefit, not disability coverage. Disability events are typically addressed through separate insurance products like disability insurance.
Therefore, if one of the insured individuals becomes disabled and can no longer make premium payments, it does not automatically result in the disbursement of the face amount. The death of the last insured remains the key event for triggering the payout.
In essence, the structure and purpose of a Joint Life and Survivor policy center around providing financial protection for a couple until the death of the last surviving partner. Understanding these specifics is crucial in differentiating it from other types of life insurance policies and clarifies why the payout occurs upon the death of the last insured.
- K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
- The part of Government Audit which is concerned with examining whether the money has been spent for the purpose specified in Appropriation Act is called.