Married couples looking for a way to lower the cost of life insurance or to make sure their estate is protected from taxes when they die may want to consider joint life insurance, sometimes called dual life insurance.
Not as common as individual life insurance, joint policies are designed to enable two people, typically spouses, to share in one life insurance plan. Joint life insurance comes in two flavors: first-to-die, which pays out to the surviving spouse after the first dies; and second-to-die, or survivorship, which pays a death benefit to the heirs after both spouses are gone.
What is joint life insurance?
The definition of joint life insurance is similar to the definition of standard life insurance, except that joint life insurance is specifically designed to cover a couple instead of an individual. These two people don’t have to be a couple in the romantic sense. However, that is one of the most common scenarios for this kind of insurance. These policy types cover two people, no more, no less.
This particularity places joint life insurance somewhere between group life insurance and individual life insurance plans. With individual life insurance, each of the two people would have to take out a separate policy. When it comes to joint life insurance policies, most fall under the permanent life insurance category. Still, you can find companies that offer joint term life insurance policies as well. Whether term or permanent, you will have to choose between first-to-die insurance and second-to-die insurance.
Types of joint life insurance policies
First-to-die life insurance
With first-to-die, the policy pays out as soon as the first person dies, making the payout to the survivor. The primary goal of this type of joint life insurance is similar to individual life insurance. It is often used to compensate for the lost income of a spouse or partner who dies. Whether it’s the loss of one individual in a dual-income household, or the loss of the primary income earner, first-to-die policies payout to the survivor so that they have finances on hand in their time of need.
Second-to-die life insurance
Second-to-die policies make their payout after both of the insured persons have died. This benefit is paid to their beneficiaries. Unlike first-to-die, this type cannot provide a payout to either of the two people who are covered by the plan. Second-to-die, instead, is geared towards their beneficiaries. One of the upsides of doing it this way, instead of using two individual life insurance plans, is savings. You not only save money on the premiums, but also end up paying fewer taxes on the death benefit.
In short, first-to-die is designed to help the surviving member of the insured couple, while second-to-die is purely for beneficiaries and cannot payout to the two who are insured.
Who should have a joint life insurance policy
In general, spouses and couples are the target audience for joint life insurance policies. While these policies are not limited to such a relationship, they have been designed and tailored for it. If you and your partner are both significant income earners within your family, then it makes sense to have life insurance for both of you.
Dual income households are excellent examples of situations where joint life insurance policies make sense. Within this demographic, younger couples with children and mortgage payments benefit the most from these policies. In general, the worse it will be financially to lose either person in a couple, the more sense it makes to obtain a joint life insurance policy.
How to get joint life insurance
The first step in buying any insurance policy is to determine what you’re looking for. After you’ve decided what kind of policy you want, it’s time to shop around and compare companies. Once you’ve found the company that offers good joint life insurance quotes on the policy coverage you want, it’s time to apply. This step can be done in a number of different ways. Generally, you can meet with an agent in person, talk to them over the phone, communicate via email or apply for a policy online through the insurance company’s website.
Before the application can be fully reviewed, you and your partner will likely need to submit to an insurance medical exam. This helps the company to determine eligibility and premium rates. After this, provided there are no unexpected problems, all that’s left for you to do is to receive your policy and make your first payment.
Frequently asked questions
What is the best life insurance?
The best life insurance for you will depend on your budget and the coverage you want. To help you get started shopping around, here are the Best Life Insurance Companies of 2020.
Is joint life insurance cheaper?
Yes, generally joint life insurance is cheaper than purchasing two individual policies. The process is less expensive for the company, and cohabitants tend to live longer, making joint policies more profitable for companies. Some of this gets passed back to the customer in the form of lower premiums.
What happens to joint life insurance after a divorce?
There are three options you can pursue after a divorce. You and your ex can maintain the policy as it is. You can cancel the plan. Finally, you can request that the insurance company convert the joint policy into individual plans.