Final answer:
A joint life insurance policy that pays upon the death of the first of two insured individuals is known as a first-to-die or joint first-to-die life insurance policy. This form of cash-value life insurance has a death benefit and can accumulate cash value over time. The actuarially fair premium for such insurance may vary based on different risk factors present within the insured group.
Step-by-step explanation:
A policy that pays out the face amount upon the death of the first person among two lives insured is commonly referred to as a joint life insurance policy, specifically a first-to-die or joint first-to-die life insurance policy. Such policies are a form of cash-value (whole) life insurance, which includes a death benefit and may have an accessible cash value. The cash value grows over time and can potentially be used by the policyholders as an account for personal use.
Life insurance is an insurance method that provides a safety net that can help protect individuals from financial loss due to the death of the insured. With regular premium payments made to the insurance company, a death benefit is paid out to beneficiaries, which could either be a lump sum or an annuity, depending on the structure of the policy. These funds are meant to help alleviate financial strain at a time of loss. In the context of a joint first-to-die policy, it targets couples who want to provide immediate financial relief to the survivor after the first death.
The sale of life insurance policies can be affected by factors such as family medical history. For example, if an insurer has to determine an actuarially fair premium for groups with different risks (such as a family history of cancer), the premium would be higher for groups with greater risks. When life insurance is offered to a mixed group without accounting for these risk differences, it leads to a more uniform premium for the group but can introduce imbalances and potential losses for the insurance company.