What is the primary distinction between a joint first to die contract and a joint last to die contract?

A joint first to die contract is designed to provide a death benefit upon the death of the first insured individual. This type of policy is often used by couples or business partners who wish to ensure that funds are available immediately upon the death of either party, which can be important for covering expenses like a mortgage or business liabilities.

In contrast, a joint last to die contract pays out only after the death of the second insured. This is typically used for estate planning purposes; it ensures that the surviving insured individual is able to continue living without the immediate financial burden of loss, and the death benefit can then be used to cover estate taxes or provide for beneficiaries after both are deceased.

The distinction in when the payout occurs—upon the death of the first insured in a first to die policy versus the death of the last surviving insured in a last to die policy—is crucial in determining the purpose and benefit of each type of policy. This helps in choosing the right policy based on the financial needs and circumstances of those insured.