Choosing the right life insurance policy can be a daunting task. Some couples opt to simplify the process by purchasing what is called joint life insurance. Joint life insurance insures two people with one policy. It’s typically broken down into two coverage options: first-to-die insurance and second-to-die insurance.
First-to-die insurance coverage insures two people (a married couple, for example, or business partners) and pays out when the first person on the policy dies. These policies are designed to pay the living expenses of the survivor of a partnership. If a spouse dies, the other has enough money for child care, mortgage payments, debts and medical bills. If a business partner dies, the survivor gets some much-needed cash to keep things running.
First-to-die coverage often can be added to an existing policy. According to Farmers insurance, its First-To-Die Plus rider allows two lives to be insured for a reduced rate.
Second-to-die life insurance
Also called “survivorship” insurance, second-to-die policies pay the insurance benefit only after both people on the policy have died. This type of insurance often is used by those who want to leave a large inheritance to their heirs or by those whose families don’t necessarily need extra money after the first insured party dies.
New York Life, for example, encourages second-to-die coverage for family business owners or those with an estate that would be subject to estate taxes. The death benefit would help surviving family members pay the taxes owed and keep a business or home in the family.
Pros and cons of joint life insurance
As with any type of policy, there are advantages and disadvantages.
- Premiums are usually lower with joint life insurance policies than they would be if you were to buy two separate life insurance policies.
- Joint life insurance policies tend to have more lenient underwriting policies, making life insurance easier to get if one person is healthier than the other, according to New York Life.
- When buying a joint life insurance policy, you can opt for either permanent life insurance or term life insurance. You also have the option of insuring the person on the rider with term coverage and then converting that coverage to a permanent policy, according to Farmers.
- Additional coverage may be required. If you have first-to-die insurance, the survivor may need to buy an additional policy after the first death to cover expenses and leave some money behind if, for example, there are still dependent children involved.
- Not all companies provide joint life insurance.
- If there are age or health differences between the insured parties, the younger, healthier one may end up paying more for coverage than he or she would under an individual policy.