When buying life insurance, you might think it’s just something you need for yourself. But if you’re married or in another important partnership, it’s probably a good idea for both of you to be covered. Traditional life insurance policies cover just one person; joint life insurance policies are built for two
You could buy individual lic policies, or joint life insurance might meet your needs. Joint insurance offers coverage for two people for a single premium payment each month.
Here’s an overview of what joint life insurance is, how it works, and how to decide whether it might be right for you.
What is joint life insurance?
Traditional life insurance policies cover just one person; joint life insurance policies are built for two. Most often, this means two spouses, but other situations might also be appropriate for a joint life insurance policy.
Joint insurance is typically permanent insurance, which stays in effect as long as you continue to pay the premiums, not a term policy, whose term ends on a set end date. Depending on how a permanent joint life insurance policy is structured, it may build cash value that grows tax-deferred.
Types of joint life insurance
Joint insurance policies aren’t all the same. For example, you can choose between first to die or second to die coverage.
First to die joint insurance
A first to die life insurance policy works mostly the same way single-person coverage works. When one spouse passes away, the surviving spouse receives a death benefit from the policy if the spouse is the beneficiary. The proceeds can be used toward funeral expenses. A mortgage, day to day living expenses — in any way the surviving spouse (or life insurance policyholder if you’re not married) chooses.
The important thing to know is that once one person covered by the policy passes away, no further benefits are issued. If you’re a surviving spouse, for instance, you’d have to get a new life insurance policy for yourself if you want to stay covered. This could be costly or difficult, depending on your age and health at that time.
Second to die joint insurance
Second to die joint insurance policies, also called survivorship policies, work a little differently. With this type of joint life insurance, no death benefit is paid out until both parties covered by the policy have passed away. Then the proceeds are paid out to the policy’s beneficiary or beneficiaries.
A second to die policy doesn’t net any tangible benefit to the surviving spouse, other than the knowledge that their beneficiaries will receive the proceeds from the policy in the future. The surviving spouse is still responsible for paying the premiums to maintain coverage.
Who may want joint insurance?
Joint insurance may be an option for newlyweds or married couples who don’t have insurance in place yet. A first to die policy could ensure that a surviving spouse is taken care of financially. While couples could use a second to die policy to create a financial legacy for their children.
A first to die permanent life insurance policy may also be worth considering. If you want financial protection and a cash value component, but you don’t want two separate policies.
In some cases, life insurance might be less expensive than two separate permanent lic policies.