Comparing survivorship life insurance to joint life insurance policies, how do their premiums differ?

Survivorship life insurance, also known as second-to-die insurance, is designed to provide a death benefit when both insured individuals have passed away. This type of policy typically has lower premiums compared to joint life insurance, which insures two people and usually pays out upon the death of the first insured.

The reason for the lower premiums in survivorship life insurance is primarily due to the underwriting risks involved. Survivorship policies are based on the joint life expectancy of both insured individuals, meaning the insurer only pays the death benefit when both have died, which generally results in longer expected payout timeframes. Consequently, this tends to reduce the overall risk for the insurance company, allowing them to offer lower premiums.

In contrast, joint life insurance pays out upon the first death, which can occur at any time, resulting in a higher immediate risk and typically higher premiums. Therefore, the correct answer demonstrates a key difference in the financial structures and risk assessments involved in these types of insurance policies.