Premiums on Joint-Life Policies

The principles underlying the computation of rates on joint-life policies are the same as those used in computing the rates on policies covering single lives, with the exception that the theory of probability of death must be applied with reference to two or more lives, instead of one, in order to determine the liability of the company. Manifestly, since the company agrees to pay the policy as soon as one of two (or more) persons dies, the premium on a joint-life policy is higher per $1,000 of insurance than the rate on a policy on either life alone. On the other hand, it is apparent, that the premium on a joint-life policy covering two persons is less than the sum of the premiums on the policies insuring the two lives separately. On the two separate policies the company's liability is greater because each will involve the payment of its face value upon the death of the insured, while under the joint-life policy only one claim will be paid i.e. upon the happening of the first death and the policy will terminate at that time.

An examination of the rates in the graph (being those charged by a certain company) shows, for example, that where the ages of the two persons insured are 25 and 30 respectively, the rate for the joint whole-life policy is $32.16, while the sum of the rates on two whole-life policies insuring the two lives separately, viz, $19.00 at age 25 and $21.80 at age 30, is $40.80. It will also be noted that the inclusion of an older person in the insured group will materially increase the premium on a joint-life policy. Where the two persons insured, for example, are aged 25 and 60 respectively, the joint-life premium will have increased to $79.32, yet this rate is $12.38 less than the sum of the rates ($19.00 at age 25 plus $72.70 at age 60) on two policies taken out separately on these lives.