Chapter 15 - Life Insurance In The Family Setting

Question 1

Using one life policy to insure a couple

Answer 1

Joint Life Policy (First to Die) - covers the lives of two (or more) people with one death benefit. Lower premium cost than having two premiums. It brings in both of their ages, genders, and other risks when addressing the premium.

Survivorship Life Policy (last to die) - same as joint life, except its when the last person dies. The policy typically will pay estate taxes. When a married person dies, the asset transfer to the spouse is tax free. When the second spouse dies, the feds assess estate taxes. Rich people use this to make sure the inheritance for the kids stay in tact.

Question 2

Family Policies

Answer 2

Family policy - the breadwinner will be a permanent policy with a large death benefit. The children and non working spouse will be on individual policies grouped under a Convertible Level Term Insurance with smaller benefits. Any newborns are covered without additional premium.

Family Income Policy - whole life policy couple with a decreasing term rider. All the on the family breadwinner. The term insurance provides a gradually decreasing amount of family income in case the breadwinner dies during the need income period, usually the child rearing years.

Family Maintenance Policy - whole life insurance combined with level term, not decreasing term.