Joint Life with Last Survivor Annuity – Definition

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Joint Life with Last Survivor Annuity Definition

Joint life with Last Survivor annuity is an insurance plan that allows the beneficiaries (annuitants) to receive contractual payments. If one beneficiary passes away, the second covered beneficiary receives payments until death. This type of insurance plan always requires two or more annuitants (usually married couples).

A Little More on What is a Joint Life with Last Survivor Annuity

Just like any other annuity, which entails lifetime periodic (generally monthly payments, the joint and survivor annuity is also a lifetime payment instrument. Spouses can decide on terms before the annuity payment starts, but these terms will not stop payment from rolling in until both partners die..

Monthly payments in a joint and survivor annuity are dependent on the options set by the insurance company or the terms agreed on by the insured. If the terms of the annuity states that 50 percent of payments should be made to the beneficiary; when a partner dies, the payment will be reduced to 50 percent. But in the case of a 100 percent joint and survivor annuity, the same amount or initial payment will continue until the second partner also dies.

It is important to remember that an annuity is a type of insurance plan designed by insurers. A joint and survivor annuity requires that you pay the value of the policy or contract. It can also be a lump sum payment or a series of payments to the insurance company. Once this payment is made, and the contractual stipulations are met, the annuity beneficiaries begin to receive regular disbursements every payment period.

References for Joint Life with Last Survivor Annuity

Academic Research on Joint Life with Last Survivor Annuity

Pricing practices for joint last survivor insurance, Youn, H. (2001). This paper discusses pricing practises for joint and last survivor insurance. The actual calculations and pricing models of joint last survivor insurance are discussed. In a joint and last survivor insurance policies, pricing standards may differ across companies. Aside from considering pricing factors to compensate the insured, how to settle the last survivor in the joint insurance is also important.

Joint life annuities and annuity demand by married couples, Brown, J. R., & Poterba, J. M. (1999). (No. w7199). National Bureau of Economic Research. This article discusses the range of joint life and survivor annuity plans that couples demand and the viable utility gains or values available for the couples. Unlike individual annuities, it is more difficult to estimate couple’s annuity due to certain factors such as joint consumption, interdependent utilities, and correlated mortality rates between the couples. Also, valuing couple’s annuitation requires that survivor benefits available after one spouse has died is put into consideration. This article also identifies that utility values gained from annuitization is smaller for couples than for single individuals.

Annuity valuation with dependent mortality, Frees, E. W., Carriere, J., & Valdez, E. (1996). Journal of Risk and Insurance, 229-261. This journal discusses annuity valuation with dependent mortality. It treats the subject matter of valuing annuities where the promise to provide a constant income is based on more than one life such as joint life and survivor annuity. Standard insurance practice adopts independence of lives when valuing annuities but this article uses the dependent mortality models to evaluate joint and last survivor annuity. Using the statistics of many insure results show that there are positive impacts of dependence between joint lives, especially ones with real economic significance.

Statistical aspects of joint life insurance pricing. Youn, H., & Shemyakin, A. (1999). 1999 Proceedings of the Business and Statistics Section of the American Statistical Association, 34138.This paper explicitly shows the statistics of different range of pricing exhibit in joint life and last survivor insurance. The statistical aspect will help to establish pricing models that insurers adopt and the gains or values attributed to each pricing model.

Annuity markets: Problems and solutions, Blake, D. (1999). Geneva Papers on Risk and Insurance. Issues and Practice, 358-375. This is a paper on insurance risks and issues surrounding insurance practises such as problems of annuity markets. This paper however does not only discuss problems of annuity markets but also solutions to these problems. The most challenging problems for annuity providers are adverse selection problems and mortality improvement risks such as interest rate, reinvestment and inflation risk. However, these problems or risks can be effectively tackled if annuity providers pay attention to annuity purchases to hedge interest rate risk. Limited price index bonds can also help to avert inflation risk while indexed life bonds can tackle mortality risk. The effects of diverse institutional forms for annuity market were also examined.

Bayesian estimation of joint survival functions in life insurance, Shemyakin, A. R. K. A. D. Y., & Youn, H. (2001). Monographs of Official Statistics. Bayesian Methods with applications to science, policy and official statistics, European Communities, 4891496. This paper presents an estimate of how joint and last survivor annuity functions in life insurance using Bayesian estimation. This includes an estimate of official statistics of large insurance firms and annuity providers. Bayesian method of estimation applies to the policies of European societies as well as their official statistics.

Insurance Models for Joint Life and Last Survivor Benefits, Matvejevs, A., & Matvejevs, A. (2001). Informatica, 12(4), 547-558. There are different models or types of insurance policies for married couples, this is a discussion of these insurance models and their benefits. Three kinds of insurance policies for the net premium calculation for married couples are discussed in this paper. While the net premium equation principle is used in all premium calculations, the quality of the additional pension assurance is largely dependent on individuals. This means that the way an annuitant undertakes an insurance plan and the limitations of such plan determine the pension assurance.

Measuring the impact of dependence among insured lifelengths, Denuit, M., Dhaene, J., Le Bailly de Tilleghem, C., & Teghem, S. (2001). Belgian Actuarial Bulletin, 1(1), 18-39.This paper talks about how the impact of dependence among insured partners in a joint life and last survivor annuity is measured. Through studies, the dependence of the lifetimes of paired couples is evaluated. The studies show that this dependence literarily affects the values of annuities and insurances involving partners. The impacts are seen in the areas of net premium billed for annuities,and the widow’s pension or insurance paid to the partner alive at a regular interval.

Annuity risk: Volatility and inflation exposure in payments from immediate life annuities, Soares, C., & Warshawsky, M. J. (2004). Developing an Annuity Market in Europe, 93-111. Following the original design of payment of annuities, annuity payments can be fixed in nominal terms and they can sometimes increase. However, there is a significant volatility and inflation risks noticeable in initial payments of annuities which range from fixed immediate life annuities and inflation risk during .retirement.  Many researchers have raised concerns on this deviation and this paper examines these issues using the high frequency data. There are findings that of a truth, there is a deviation in the initial payments from nominal fixed annuities. Phased purchases of fixed annuities can curb this volatility and focusing on inflation-adjusted annuity can curb inflation risks and volatility to a certain degree.

Shifts in interest rate and common shock model for coupled lives, Denuit, M., Frostig, E., & Levikson, B. (2006). Belgian Actuarial Bulletin, 6(1), 1-4. This paper discusses shifts in interest rates and common shocks in annuity plans for couple, a joint life and last survivor annuity being a good example. This shift in terms of structure and interest rates is examined. Furthermore, the classical model of dependent lives which is also referred to as common shock and the changes associated with them are addressed.

From ‘Benefits’ to ‘Guarantees’: Looking at Life Insurance Products in a New Framework, Pitacco, E. (2013).

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