Getting Back to Basics on Property Ownership
We came across a question regarding what would happen on the death of one of the lives assured on a joint life first death policy where that policy is held as tenants in common. This article will show you how this scenario is treated – of interest to those studying for their CII AF1, R05 or J02 exams.
Not a very likely scenario in the real world but the question came up on the Revisionmate system so it’s something students of the R05 exam and J02 exam might want to consider and perhaps some of the other exams that include protection and property ownership.
Let’s remind ourselves of how property can be held:
Under a joint tenancy if one of the joint owners dies, then their share of the property automatically passes to the surviving joint tenant.
This is usually how any joint life first death policy would be held so that on the first death of one of them the sum assured would be paid to the survivor as the other joint tenant.Do you know how tenants in common are treated on a joint life first death policy? Click To Tweet
Tenants in Common
Under a tenancy in common arrangement, the situation is different. On the death of a tenant in common, the property does not revert automatically to the survivor. Instead it passes to the deceased’s estate and distributed according to their will, if they have one, or the laws of intestacy if they don’t.
It is not often that a joint life first death policy would be held as tenants in common but should the question come up in your exam as to how the sum assured is distributed, what is the correct answer? Firstly, here’s the question:
If a married couple own a joint life first death policy as tenants in common and one of them dies, how is the sum assured distributed?
Let’s assume they hold the policy in equal shares of 50/50. On the death of one of them half the sum assured would be paid to the survivor and half would be paid to the estate of the deceased.
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