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“What’s mine is yours” is a heartwarming notion of married life that, yes, can also be applied to life insurance. Couples can get a one-and-done life insurance policy — but keep in mind that it’s not always cheaper or the right decision for everyone.
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What are joint life insurance policies?
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.
Why would I get one?
Joint policies are less common than individual, but in some cases it might be the better option if:
- 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.
How do joint life insurance policies work?
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
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.
What are the pros and cons of joint life insurance?
Joint life insurance has its place in the market, but the actual benefits depend on your particular circumstances. Potential pros and cons include:
Pros
- Potentially cheaper monthly premiums
- Save time upfront applying for and managing the policy
- Financial protection for beneficiaries
- Contact a single agent or provider for customer service
Cons
- Higher premiums if one partner has poor health
- In second-to-die plans, beneficiaries will likely have to wait longer to get the death benefit payout
- In first-to-die plans, the surviving spouse will be left without life insurance of their own
- The fallout can get complicated during a divorce, since exes will need to either cancel the plan or compromise on how to manage/divide it.
- Joint term life insurance policies may not be paid out to the beneficiaries at all if the policyholders outlive the policy.
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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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