13. Gavin and Guinevere have purchased a life policy together covering both their lives. Gavin dies and the policy pays nothing. Later on, Guinevere dies and the policy death benefit is paid to the beneficiary. This is called a
Answer: A
Survivorship life policy.
A survivorship life policy is designed to pay out a death benefit only after both insured individuals have passed away. In this case, since Gavin died first and the policy did not pay out until Guinevere's death, it aligns perfectly with the definition of a survivorship life policy.
A) Survivorship life policy.
This option is correct as it accurately describes the type of policy in question. A survivorship life policy is structured specifically to benefit the beneficiaries only after both insured parties have died, which is precisely what occurred in this scenario.
B) Joint life policy.
A joint life policy typically pays out a death benefit upon the death of the first insured person. Since the policy did not pay out upon Gavin's death, this option is incorrect. Joint life policies do not operate on the principle that both insured individuals must pass away before a benefit is paid.
C) Limited pay life policy.
This option refers to a type of whole life insurance where premiums are paid for a limited time but the coverage lasts for the insured's lifetime. It does not relate to the sequence of deaths involved in this scenario and therefore is incorrect.
D) Convertible term policy.
A convertible term policy allows the policyholder to convert a term policy into a permanent policy without undergoing further medical underwriting. This option is irrelevant to the situation described, where the issue is about the timing of the death benefit payment rather than policy conversion, making it incorrect.
Conclusion
The correct answer, a survivorship life policy, is definitively right because it specifically denotes a policy that pays out only after both insured parties have died. All other options fail to accurately describe the mechanics of the policy as it relates to the circumstances of Gavin and Guinevere's deaths and the subsequent payment of the death benefit.