South Carolina Life Insurance Practice Exam

What does the premium of a survivorship life policy compared with that of a joint life policy indicate?

1. It is typically lower than joint life policy

2. It begins when the policy is delivered

3. It is based on the age of the younger insured

4. It is paid at the time of claim

The correct answer is: It begins when the policy is delivered

The premium of a survivorship life policy is typically lower than that of a joint life policy because it covers two lives and pays out only after both insured individuals have passed away. This means that the insurer anticipates a longer period before they will have to pay the death benefit, allowing them to offer a lower premium compared to a joint life policy, which pays out upon the death of the first insured. In contrast, a joint life policy pays out after the first of the two covered individuals dies, increasing the insurer's risk and therefore the premium. This fundamental difference in payout timing and structure directly impacts the cost of the premiums. While it is true that the premium for a survivorship life policy is based on the ages of the insured individuals, it does not begin when the policy is delivered; rather, premiums are typically considered to be due from the inception date of the coverage. Similarly, premiums are not typically paid at the time of claim; they are paid regularly over the policy’s term. Thus, analyzing the nature of survivorship life insurance provides a clear understanding of why the premium structure differs from that of a joint life policy.