A first-to-die life insurance policy can make sure your partner or spouse can maintain their lifestyle if you die and they can no longer count on your income.
But it only pays out once, so it might not be enough for your children if you’re both gone.
A first-to-die life insurance policy insures two people and pays out when the first one dies. For example, if two spouses get a first-to-die policy and one of them passes away, the living spouse would get the death benefit money. The policy would then be over, and the living spouse would no longer be insured.
Single life insurance policies cover one person, so for you to both be insured you’d need to take out two policies — which is generally more expensive. But if one of you is sick or significantly older than the other, a joint policy could end up costing the same or more.
Having two single insurance policies also means you’re both insured, and if you both die, more money will be left to your beneficiaries.
For example, if you take out a $50,000 first-to-die policy that covers you and a spouse, and you both die in a car crash, any contingent beneficiaries — like your children — will receive $50,000. That might not be enough to cover the loss of both incomes. With two single policies, they’d get $100,000.
To figure out how much insurance you’ll need, factor in:
When choosing a life insurance policy, compare:
Most joint life insurance policies are sold to married couples with a family. Though policies can also be for couples who have built a life together or business partners. If you have a relationship with someone that involves financial codependence, a life insurance policy may be in your best interest.
It’s always best to shop for joint life insurance plans when you are young and healthy. Applying while you aren’t suffering from health issues, or getting on in age will likely give you more options and more affordable prices.
If you and your partner or spouse separate or get divorced, dealing with a joint life insurance policy can get tricky. One way to prevent this is to ask your insurance company about adding a rider that allows you to split the joint policy into two individual policies if you separate.
If you don’t have a rider that allows that, your lawyers will need to work out an agreement for the life insurance policy in the divorce or separation agreement.
A first-to-die policy isn’t the right option for everyone. You may also want to consider:
No one expects to get sick, seriously injured or pass away suddenly, but the reality is that it can happen to any of us at any time. While the uncertainties of life shouldn’t slow us down, it’s best to be prepared for all situations. Finding the right life insurance policy can alleviate stress and financial hardships so your family will always be taken care of.
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