Combination and survivorship life plans

What a combination plan is

A combination plan packages more than one kind of life insurance protection in a single contract. Most often it joins a permanent base, usually whole life, with term insurance, or it covers more than one person under one policy. The point is to buy protection shaped to a household's needs for less premium than buying several separate policies.

Combinations of whole life and term

Family income policy. Whole life plus decreasing term. If the insured dies during the family income period (say, 20 years from issue), the beneficiary receives a monthly income for the rest of that period, and the whole life face amount is paid as well. The longer the insured lives, the shorter the remaining income period, which is why the term portion is decreasing.
Family maintenance policy. Whole life plus level term. If the insured dies within the stated period, the monthly income runs for the full period measured from the date of death, so the term need does not shrink over time.
Multiple protection policy. Pays a multiple of the face amount (double or triple, for example) if death occurs during a stated period, typically to a set age such as 65, and only the base face amount after that. The extra protection is term coverage layered on whole life.
Economatic whole life. A participating whole life base, with supplemental coverage provided by a mix of decreasing term and paid-up dividend additions. The dividend additions are meant to grow until they equal the supplemental coverage, but dividends are not guaranteed, so the supplemental coverage can drop if they fall short.

A related plan is the modified life plan: whole life with a lower premium for the first few years and a higher-than-regular premium afterwards. It changes the premium pattern rather than combining coverages, and it is built for buyers who cannot yet afford the full whole life premium.

The family policy

The family policy covers every member of the immediate family under one contract: whole life on the primary wage earner, usually term on the spouse, and term on each child, sold in units such as $5,000 on the wage earner, $1,500 on the spouse and $1,000 on each child. Children born or adopted later are typically covered automatically, and child coverage is usually convertible to permanent insurance without evidence of insurability when it ends.

Policies on two or more lives

Two timelines, one for each kind of policy on two lives, each marking a first death and a second death. On the top timeline, joint life, also called first to die, the benefit is paid at the first death and the policy ends there, so nothing is paid at the second death. On the bottom timeline, survivorship, also called second to die, nothing is paid at the first death; coverage continues and the benefit is paid only at the last death. Notes underneath say the joint life premium is higher than for a policy on one life, and the survivorship premium is lower than for a policy on one life. — Joint life pays at the first death; survivorship pays at the last.

Joint life (first-to-die). Covers two or more people and pays the death benefit at the first death; the policy then ends, and the survivors are left uninsured under it. Its premium is higher than a policy on one person, because the chance of a claim in any year is higher, but lower than separate policies on each life. Business partners funding a buy-sell agreement and couples covering a mortgage are typical buyers.
Joint and survivor life, also called survivorship or second-to-die. Covers two or more people and pays only at the death of the last insured. No benefit is paid at the first death. Because the claim is deferred until both have died, the premium is significantly lower than insuring either person alone, and an uninsurable or older spouse can often be included. The classic use is estate planning: a married couple can usually defer estate tax until the second death through the marital deduction, and the survivorship policy delivers cash at exactly that moment.

Exam cue: "first death" means joint life; "last death" or "second to die" means survivorship. Joint life costs more than a single-life policy; survivorship costs less.