A First to Die insurance policy is also known as joint whole life.
A First to Die insurance policy insures multiple people. When one of the insured persons dies, the benefits are paid to the remaining policy holders.
This policy is often cheaper for married couples than having separate policies covering each spouse.

ADVANTAGEOUS TO MULTIPLE OWNERS OF A BUSINESS

This type of policy is advantageous to a company with multiple owners or key personnel. When the loss of several individuals would cripple the performance of a company, these individuals could be covered by a First to Die Insurance Policy. Upon the death of one of the insured, death benefits help the beneficiary or beneficiaries continue the operation of the company or buy out the interest of the deceased from his family.

Owners of a company may also purchase this type of policy to insure each individual owner. If an owner dies, the beneficiaries are the other owners. This provides financial resources to purchase the deceased’s share of the business.

The business document that covers the specific handling of purchasing an interest of a jointly owned company is known as a buy-sell agreement. The purchase price is agreed upon, and the insurance coverage is set for that agreed upon amount. Several types of Buy-Sell Agreements exist and should be explored before deciding on the correct plan.

• Consult an insurance agent to explore the variations of the plan available.

FIRST TO DIE FAMILY PLAN

The First to Die Family Plan is a popular policy for a dual income family. The death benefits provide immediate financing to pay off a mortgage or provide funds so mortgage payments can be met while the money is invested. The policy is also popular with children who need a cash investment to buy a family owned business. A negative of this policy is without proper planning, the surviving spouse pays unnecessary estate taxes.

This is the same type policy mortgage companies use to insure mortgage payments. Upon the death of the insured, the benefit is paid. The difference is that the mortgage company is the beneficiary. The difference in a mortgage insurance policy is that the amount of benefits decrease as the principal balance of the mortgage is paid down.

FIRST TO DIE POLICIES

• These types of policies tend to be very structured and not as changeable as general policies.
• This type of policy can insure a continuation of a company’s operation if a primary owner dies. It can provide a source of income until the estate is settled.
• Generally, proceeds from insurance policies are free from income taxes.
• A Last to Die policy is preferred by people concerned with paying estate taxes or leaving benefits to children.

Printer Friendly Version