Life Insurance Apportionment

When life insurance premiums are paid using both community property and separate property funds, the proceeds from the policy are divided based on the proportion of each type of fund used. For term life insurance, the last premium paid determines the division, while for whole life insurance, the division is based on the ratio of total premiums paid from each source.

A couple uses $10,000 from their community funds and $5,000 from one spouse's separate funds to pay for a whole life insurance policy. When the policy pays out $150,000 after one spouse's death, the community estate is entitled to 67% of the proceeds, while the separate estate receives 33%.

Proceeds split based on who paid the premiums!

Exams may confuse students by mixing up the rules for term and whole life insurance, leading to incorrect apportionment calculations. Pay close attention to the type of insurance when determining how to divide the proceeds.

Questions often present a scenario involving mixed funding for life insurance premiums and ask for the correct division of proceeds, testing your understanding of the last-premium and pro-rata rules.