Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
Whole Life and Level Term Rider
The Correct Answer Is:
- Joint Life
The correct answer is “Joint Life.” A Joint Life insurance policy is designed to protect an insured individual and their spouse or partner from an unpaid mortgage balance upon the premature death of either party. Here’s a detailed explanation of why this answer is correct, along with explanations of why the other options are not:
Joint Life – Correct Answer:
Joint Life insurance is a type of life insurance policy that covers two individuals, typically a husband and wife or domestic partners, under a single policy. It is designed to provide financial protection to both individuals, and it pays out the death benefit upon the first death within the coverage period.
This means that if one of the insured individuals passes away, the policy provides the death benefit to help cover financial obligations such as an unpaid mortgage balance. Joint Life policies are often used to protect the surviving spouse or partner from financial hardships resulting from the death of the other insured.
Key features of Joint Life insurance include:
- Coverage for Two Individuals: Joint Life policies cover two people under a single policy, and the death benefit is typically paid upon the first death.
- Mortgage Protection: These policies are commonly used to protect against an unpaid mortgage balance if one of the insured individuals were to pass away prematurely.
- Survivor’s Financial Security: The surviving spouse or partner receives the death benefit to help maintain financial stability and cover financial obligations.
Now, let’s discuss why the other options are not correct:
Survivorship Life insurance, also known as Second-to-Die Life insurance, covers two individuals (usually a married couple) under a single policy but pays out the death benefit upon the second death.
It is typically used for estate planning and to provide an inheritance for heirs. While it can indirectly help with mortgage protection, it is not specifically designed to address an unpaid mortgage balance upon the first death, as in the case of a Joint Life policy.
A “Family Plan” is not a specific type of life insurance policy. It is a broad term that can encompass various insurance products designed to protect the financial well-being of a family. However, it does not describe a particular combination plan or policy tailored for mortgage protection upon the premature death of one of the insured individuals.
Whole Life and Level Term Rider:
This combination refers to combining a Whole Life insurance policy with a Level Term insurance rider. Whole Life insurance provides permanent coverage for the insured’s lifetime and includes a cash value component, while a Level Term rider typically provides additional coverage for a specific term, such as 10, 20, or 30 years.
While such a combination can provide a flexible approach to life insurance coverage, it is not inherently designed for mortgage protection in the event of premature death and is not specific to covering the unpaid mortgage balance.
In summary, a Joint Life insurance policy is specifically designed to protect an insured individual and their spouse or partner from an unpaid mortgage balance upon the premature death of either party.
It is an insurance solution tailored for couples to ensure that the surviving spouse or partner can maintain financial stability and cover financial obligations, such as a mortgage, after the death of the other insured individual.
The other options, including Survivorship Life, Family Plan, and the combination of Whole Life and Level Term Rider, do not address this specific need for mortgage protection upon the first death in the same way that a Joint Life policy does.