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Joint life insurance for couples
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“What’s mine is yours” is a heartwarming notion of married life that can also be applied to life insurance. Couples can get a joint life insurance policy — but keep in mind that it’s not always cheaper or the right decision for everyone.
What is joint life insurance and how does it work?
Joint life insurance is a single policy that covers two people, meant for married couples. It’s similar to traditional life insurance in that you’ll choose your coverage and make a single monthly payment for premiums. And it’s available as either a permanent or term policy.
How do I compare joint life insurance policies?
There are two types of joint life insurance policies: First-to-die and second-to-die. While the former is concerned with protecting heirs, the latter can help a surviving spouse maintain their way of life.
First-to-die life insurance
After the first partner dies, this policy pays out to the surviving spouse to support them financially once they’re on their own.
First-to-die joint life insurance can often have cheaper premiums than two individual policies since there’s only one payout at the end. But this isn’t a hard and fast rule. If the surviving spouse has to buy new coverage after the other dies, it can potentially cost more in the long run.
Second-to-die life insurance
Also known as “survivorship policies,” second-to-die policies are paid out after both partners pass away. They primarily serve to protect the beneficiaries you leave behind, like children.
Sometimes, couples choose a second-to-die plan so their inheritors can more easily pay high estate taxes after they’re gone, in order to keep valuable assets in the family.
However, second-to-die policies take longer to pay out since both parties have to die. And if the survivor needs the money to live on after the first half passes away, they won’t have access to that coverage.
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Who should get a joint life insurance policy?
A joint policy might make sense in these situations:
- Both partners are in good health. If your overall health levels are equivalent, it can make sense to get a policy that covers both of you. But if one person has poor health — or smokes, for example — it can increase the premium for both of you.
- You don’t need two death benefits. If your debts are paid, savings are stable and beneficiaries are largely independent, you might not need two full policies.
- It’s cost-effective. You can save in underwriting fees if the insurer can file one policy for two people. And if you opt for a second-to-die policy, you could be quoted a lower monthly payment.
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When to avoid joint life insurance
In these cases, you might be better off purchasing an individual policy:
- One partner is in poor health. If one spouse has a preexisting health condition or complex health history, that could drive up the premiums for a joint policy. This means the healthier spouse could end up paying a lot more for coverage than if they’d taken out an individual policy.
- Your beneficiaries need the death benefit right away. With survivorship policies, the death benefit is paid out when both spouses die. Depending on when the second spouse passes away, your beneficiaries could potentially wait years or decades to receive the money that was left to them.
- You might get a divorce. A joint life insurance policy can get messy during a divorce. To protect yourself if your marriage falls apart, ask your insurer about adding a rider that splits the joint policy into two individual policies in the event of a divorce.
Can you take out a life insurance policy on your spouse?
There are a few conditions to take out life insurance on someone else. First, you’ll need to prove you have an “insurable interest” — in other words, that you’d suffer financially if your spouse died. And secondly, your spouse has to be involved. They’ll have to give consent and sign off on the coverage, and go through the entire underwriting process. If you apply for a policy on your spouse’s behalf without their knowledge, that’s a type of life insurance fraud.
Bottom line
Joint life insurance can be a good option for couples hoping to share everything — and potentially cut costs while doing so. But actual savings will depend on how healthy both of you are.
Compare your options and the costs to make sure you’re making the right choice for you and your family.
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