Joint life insurance comes with several appealing benefits. Instead of covering one spouse, the policy covers both spouses – but only pays a death benefit – when one partner dies. This type of insurance can be cheaper than buying two separate life insurance policies.
How does joint life insurance work?
Joint life insurance comes in two different types, called “first-to-die” and “second-to-die.” With first-to-die, the insurance company pays a death benefit to the remaining individual who, once paid, is no longer covered. In a second-to-die policy, the policy pays out when the other person passes away, so neither policyholder will receive the death benefit. This type of policy can be purchased by couples who want the death benefit to go to another party, such as a relative or charity. In estate planning, these policies can be purchased to help the children of the family pay estate taxes.
Joint life insurance, pros and cons
Joint life insurance can be a good option for some couples, and comes with several benefits:
- It is cheaper than buying two policies.
- Can pay off property taxes, funeral expenses or other debts when both parents pass away.
- Can be purchased by spouses, domestic partners or business partners.
- Couples who have a child with special needs will want to ensure that the child has the financial resources to cover the cost of care with a term life insurance policy.
The disadvantages of this type of insurance include:
- The premiums cost more than a life insurance policy that covers a single individual.
- Health problems of a partner will affect premiums and the ability to obtain coverage.
- Joint life insurance policies owned by married couples are almost impossible to divide in property division after a divorce.
Should you buy joint life insurance?
Several life situations make joint life insurance a strategy that makes sense. If you have a larger estate that will be subject to estate taxes when you pass away, the property you intended for your children to inherit may need to be sold to cover those taxes. Many people take out such a policy to protect their children, ensure the continuity of a family legacy or to pay a death benefit to a son, daughter or grandchild.
Choosing the right policy
If you are considering purchasing joint life insurance, you need professional guidance to make the best decision. Depending on what you hope to achieve, our local agent can help you understand the types of policies available, including first-to-die and second-to-die, the cost of premiums and the insurance company that offers the best benefits at the lowest rate . They understand the legal aspects of these contracts and can explain how they work and advise you on any issues of concern, including the cost of premiums and the value of the death benefit. Several insurance companies offer these policies and our agent can help you choose the right policy to suit your situation.