Joint Life Insurance Policies with Differential Benefits and Premiums to the Policyholders

In this paper, we explore actuarial justification for equal or unequal sharing of premiums and benefits between policyholders in a product involving joint lives. The analysis reveals a fundamental difference between endowment and assurance types of products in this regard. In assurance plans, there is a clear basis for differential structure in terms of sharing premium payment. In pure endowment plans, the default system of equal premium for equal benefit may be more justified although implications of other alternatives are also considered. A justification is derived for such an alternative through appropriate discount figures as compared to individual live policies. We also suggest an alternative actuarial principle to deal with joint endowment plans: solutions have been worked out under this framework. While lives are considered to be independent for a major part of this work, the implications of dependency have also been presented here with special reference to common shock model and copula models.