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A mortgage redemption provision insures borrowers for an amount equal to their mortgages. If the borrower/insured dies, the insurer assumes responsibility for paying the outstanding loan balance to the insured's creditor.
A family protection or family policy combines whole life with term insurance to cover family members in a single policy, providing coverage on every member of a family. The family policy typically provides whole life insurance on the breadwinner of the family and convertible term insurance on the other family members. The spouse has the opportunity to convert their term coverage to permanent coverage up until age 65. Children are automatically covered after birth for a specified period of time, usually 30 or 31 days. To continue coverage for the newborn after the initial period, the parents must inform the insurer of the birth within that time period. The children may convert their term coverage to permanent coverage when they turn the age of 21, or the maximum age for coverage as a dependent that is stated in the policy, without evidence of insurability.
The family term rider incorporates the spouse term rider along with the children's term rider in a single rider. When added to a whole life policy, the family term rider provides level term life insurance benefits covering the spouse and all of the children in the family.
Family Term = Spouse Term + Children's Term
Joint life is a single policy that is designed to insure two or more lives. Joint life policies can be in the form of term insurance or permanent insurance. The premium for joint life would be less than for the same type and amount of coverage on the same individuals. It is more commonly found as joint whole life, which functions similarly to an individual whole life policy with two major exceptions:
A premium based on joint age is less than the sum of 2 premiums based on individual age, so it is common to find joint life policies issued on spouses. This is particularly so if the need for insurance is such that it does not extend beyond the first death. Joint life policies are used when there is a need for two or more persons to be protected; however, the need for the insurance is no longer present after the first of the insureds dies.
Premium rates on a joint life policy are determined by averaging the ages of both insureds.
For example, a married couple purchasing a house may use a Joint Life policy for mortgage protection if both spouses work and earn close to the same amount of income. If one spouse dies, the insurance pays the mortgage for the surviving spouse.
Joint Life is also used to insure the lives of business partners in the funding of a buy-sell agreement and other business life needs. A buy-sell is a business continuation agreement that determines what will be done with the business in the event that an owner dies or becomes disabled.
Survivorship life (also referred to as "second-to-die" or "last survivor" policy) is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life, which pays upon the first death. This type of policy is often used to offset the liability of the estate tax upon the death of the last insured.
Joint life = first to die; survivorship life = second to die (last survivor).
Juvenile life insurance is, as the name implies, any life insurance written on the life of a minor. A common juvenile policy is known as the "jumping juvenile" policy because the face amount increases at a predetermined age, often age 21. The face amount jumps, but the premium remains level.
The payor benefit rider is primarily used with juvenile policies (any life insurance written on the life of a minor); otherwise, it functions like the waiver of premium rider. If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21. This rider is also used when the owner and the insured are two different individuals.
The return of premium rider is implemented by using increasing term insurance. When added to a whole life policy, it provides that at death prior to a given age, not only is the original face amount payable, but an amount equal to all premiums previously paid is also payable to the beneficiary. The return of premium rider usually expires at a specified age such as age 60.
The main feature of indexed whole life (or equity index whole life) insurance is that the cash value is dependent upon the performance of the equity index, such as S&P 500, although there is a guaranteed minimum interest rate. The policy's face amount increases annually to keep pace with inflation (as the Consumer Price Index increases) without requiring evidence of insurability. Indexed whole life policies are classified depending on whether the policyowner or the insurer assumes the inflation risk. If the policyowner assumes the risk, the policy premiums increase with the increases in the face amount. If the insurer assumes the risk, the premium remains level.