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Joint Life Insurance: Why and When Is It a Good Idea?

Updated: September 13, 2018

Joint life insurance is an interesting option for married couples, because it provides them with enough payout for two people.

But joint life insurance policies only come with one premium, which is cheaper than getting two different policies.

Despite the price advantage, there are issues with life insurance for married couple that individuals must consider.

For example, these policies lead to complications if the couple ever decides to end their marriage.

Here is a detailed look at the positives and negatives associated with joint life insurance for married couples, along with an explanation of the different type of joint life insurance policies.

What is Joint Life Insurance?

Joint life insurance is a little different from regular life insurance policies, because the policy includes two people not a single individual. Joint life insurance is an option for married couples who want life insurance for a reasonable price.

Depending on the situation, it is possible to get a whole joint life insurance policy or a term joint life insurance policy.

The concept of joint life insurance is that the couple will get a policy that takes into account their combined health and other factors, which may lower premiums for a number of people. However, these policies only come with one payout.

It is also possible for the owners of a joint life insurance policy to name each other as the dependents. This makes it a great couple life insurance option if you only want to provide benefits for each other if one of you passes away.

Depending on the situation, it is possible to get a whole joint life insurance policy or a term joint life insurance policy. Individuals will have to make a decision about the policy that best suits their needs and circumstances.

But there are issues with joint life insurance that people must consider before committing to such a policy.

What Types of Joint Life Insurance Policies Exist?

There are two major types of joint life insurance policies: first to die life insurance and second to die life insurance policies.

The first to die life insurance policies mean that the first person out of the couple who passes away will trigger the insurance policy’s benefit.

The first to die life insurance policies mean that the first person out of the couple who passes away will trigger the insurance policy’s benefit. But it also means there is no benefit when the second spouse passes away.

In the second to die life insurance policy, the benefit only happens when the second spouse passes away. This means there is no benefit when one of the spouses passes away, but the other is still alive.

For example, consider a first to die and second to die policy, with both policies having a $300,000 payout. In the first to die policy, $300,000 is paid out to a spouse should their partner pass away. But there is no payout when the second spouse passes away. In the second to die policy, the $300,000 payout is only trigged if BOTH spouses have passed away.

Second to die policies come with cheaper premiums, but they only make sense if a couple wants to name their children as beneficiaries.

Is Joint Life Insurance Right in Your Situation?

It is important to understand why someone would choose couple life insurance over a regular policy. The first advantage is lower premiums. On average, it is cheaper to get joint life insurance than two separate policies.

The spouse who benefits from joint life insurance is usually the one who is less healthy.

However, things get more complicated when we delve deeper into the specifics of joint life insurance. If a couple has a first to die policy, the second spouse may need to purchase additional life insurance if they want to provide money for the couple’s children when the second spouse passes away.

In addition, if there is a major health difference between the two spouses, the healthy spouse may end up paying more for joint life than if they had gotten their own whole life insurance policy.

The spouse who benefits from joint life insurance is usually the one who is less healthy.

Joint life insurance can get complicated if the couple separates or gets a divorce in the future. It is even more difficult to manage a joint life insurance policy if one or both spouses remarry.

Premiums are Lower with Joint Life Insurance

There are many reasons why joint life insurance policies come with lower premiums when compared to two whole life policies.

Second to die life insurance policies have even lower premiums, because they are often claimed further down the road.

Insurance companies save money on joint life policies because they are only making one payout per two individuals. This is in contrast to the regular one payout for each person associated with whole life or term life insurance.

Second to die life insurance policies have even lower premiums, because they are often claimed further down the road. Since a first to die policy pays when the first spouse passes away, the insurance company has to make the payout earlier than they would with a second to life policy – on average.

But the lower cost is not always accurate where joint life insurance is concerned. For example, couples may end up paying more if the surviving spouse in a first to die policy needs additional coverage to protect their children or grandchildren.

In addition, the couple may end up quitting on their joint life policy if they get divorced, which means they must go back for individual policies at an older age. This can result in higher premiums than they would have paid had they obtained individual policies when they got married.

Make Sure You Buy from an A Rated Company

It is very important to get joint life insurance from a reputable company. The reason this is a concern with joint life insurance is because many companies do not provide this type of policy at all.

It is better to get policies from companies with AAA or AA ratings, but an A rating is sufficient too.

If your options are limited, it is important to assess the reliability of a company before committing to a whole joint life policy. Consider the company’s rating, which should never be below an A. It is better to get policies from companies with AAA or AA ratings, but an A rating is sufficient too.

Life insurance is something that needs to last for your entire lifetime. If a company sells you a policy, but declares bankruptcy and goes under in ten years, you are left with no policy and ten years of wasted premium payments.

While the more reliable companies do come with slightly higher premium rates, having the peace of mind and security of a reliable policy is worth the extra money.

Always consider the reliability of a company before you commit to a life insurance policy.