A joint life insurance policy is an alternative for couples who would like to provide for each other if one of them passes away. Life insurance for couples and partners is an important component of financially supporting your spouse or partner, and buying a joint life insurance policy can be a straightforward, affordable, and practical way to meet the needs of both individuals. Before you buy, identify your options and locate the very best policy for you and your spouse.
A joint term life insurance policy is a way to cover two individuals on one life insurance policy. The policy provides a level death benefit for two people for only one premium. It enables the owner of the insurance policy to have the ability to name each other as beneficiaries. The insurance policy will function just like a term life insurance policy because it will last a specific number of years and the whole premium payment will cover the death benefit amount. There are several advantages to term life that make a joint term policy an appealing option for you and your spouse or partner.
The Options: First to Die and Second to Die
First to die life insurance policies pay out the death benefit solely on the first named insured that dies. Consequently, if a husband and wife were covered under this kind of insurance policy, using a death benefit of $500,000 and the husband passes away first, the spouse would collect the death benefit of $500,000.
The insurance policy would then be exhausted. This might also be an ideal mortgage life insurance plan because when the first dies, the death benefit could pay off the mortgage balance allowing the remaining insured to live mortgage-free in the family home.
It’s important to note that although First To Die Joint Life policies are still available, the selection is rather narrow and almost always written as a Universal Life product.
Second to die life insurance policies, also called survivorship policies, will pay the death benefit on the second to die. In the scenario previously mentioned where the husband died first, the insurance policy would not have paid out until the spouse died leaving the death benefit to their particular named beneficiary or contingent beneficiary if applicable. Second to die life insurance also provides coverage for two or more people for one premium.
Because the death benefit is not paid out until the last insured passes away, the life expectancy for the policy is based on a lengthier life expectancy that allows for a lower cost. Also known as survivorship policies, these policies are popular for many circumstances. Frequently, husbands and wives or non-married partners who are retired and do not depend on each other for money will purchase a survivorship insurance policy to assist their children with estate tax liability. They are also purchased by business partnerships where after the last partner passes away, it is used to pay any kind of business expenses.
Monthly premiums are typically lower with joint life insurance policies than with purchasing separate insurance policies. Not all life insurance companies offer joint life insurance. Look for companies that carry this kind of policy that enjoy an excellent rating from A.M. Best rating services.
Always check the Free Advice insurance company rating sites and stay with insurance companies that have an A to A++ rating. Additional insurance coverage may be necessary in some cases. If you have first-to-die insurance coverage, the survivor may need to purchase an additional policy just after the first death to cover remaining expenses. If you believe that might be your situation, ask your insurance agent about a small insurance policy that will cover each individual and buy that right now. It will be simply more expensive if you put it off.
Health differences or a large difference in age between the insured parties will typically mean the younger, healthier insured paying more for insurance coverage than he or she would under a traditional individual policy. Consider all of your options. Always remember, on the first to die, the younger person will then have to get additional insurance at an older age.
Having Joint Life Insurance and getting Divorced
Bear in mind, insuring two lives is less expensive than what it would cost to insure both individuals separately. Nevertheless, it can become a difficult situation if the married couple divorces. Now you have a joint policy on your ex-husband or ex-wife! In the situation where there are children involved, it may be good to talk about setting up a trust where the insurance proceeds can be designated for the children in years to come.
If the two individuals determine that continuing the joint policy might not be in their best interest, both insureds will then be looking for additional insurance at an older age and possibly not at outstanding health, which could possibly lead to an increase in premium payments.