What is Joint Life Insurance – Forbes Advisor

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A joint life insurance policy is one policy that covers two people for the price of one premium. This type of policy can provide financial security and peace of mind to married couples, domestic partners and even business partners.

What is joint life insurance?

Joint life insurance is a type of life insurance policy that covers two people instead of one, but pays only one death benefit when one of the two people dies.

Combining two policies into one can sometimes be a more affordable option than purchasing two separate life insurance policies.

How does a general life insurance policy work?

Insurance companies offer two types of joint life insurance. Both types of policies pay only one death benefit, but differ depending on the circumstances of the payout.

First Death Joint Life Insurance.

In First Death Life Insurance, when one policyholder dies, the surviving policyholder receives the death benefit. This can provide them with financial support in their partner’s absence.

After receiving the death benefit, no additional benefits are paid and the surviving policyholder will no longer have life insurance.

Some insurance companies may offer the option to convert the policy into an individual policy with the same death benefit. But the new policy may have higher premiums.

Before purchasing a joint life policy, ask about future conversion and payout options.

Joint Life Insurance after death

Second Death Life Insurance, also called Survivor Life Insurance, pays the death benefit after the second surviving policyholder dies.

This means that no policyholder will receive a death benefit. Instead, the payout will go to the beneficiaries of the joint policies.

With Life After Death insurance, when the first policyholder dies, the remaining policyholder is responsible for continuing to pay premiums to maintain coverage.

Life after death insurance is commonly used for estate planning. For example, the death benefit from a second-die policy can be used by grown children to pay estate taxes after both parents have died.

Life after death insurance is not a good choice for young couples who need to pay their surviving spouses.

Pros and cons of joint life insurance

What are the benefits of joint life insurance?

Joint life insurance has several advantages.

  • Accessibility. A joint life policy can be more affordable for two people than buying two separate policies.
  • Estate planning. Life after death insurance provides a death benefit that beneficiaries can use to pay funeral expenses, estate taxes, and inheritance taxes.
  • No marriage required. Joint life insurance isn’t just for spouses. Many insurance companies will sell joint life insurance policies to local partners or business partners. Proof of shared assets may be required.

What are the disadvantages of joint life insurance?

Just as there are benefits to joint life insurance, there are also disadvantages.

  • It may cost more. Since you are insuring two parties, it can cost more than an individual policy.
  • A person’s health affects speed. Pricing is based on both people’s policy, but a second-to-death policy can be much more affordable when one person has health problems, as the price will be based mostly on the healthier partner.
  • They are difficult to separate in divorce. It is difficult to split joint life insurance if the couple divorces.

Who Should Buy Joint Life Insurance?

Parents and couples can purchase joint life insurance as a way to financially protect their families and their assets. Here’s a few examples:

  • Life after death insurance is a good way for a couple to provide funds that are only needed after both have died, such as funds for an inheritance or for children to pay estate taxes.
  • Parents of a child with special needs can use Second Death Life Insurance to fund a trust that will provide financial support for the child after the parents die.
  • Business partners may choose to purchase joint life insurance to protect their professional assets in the event that one partner predeceases the other.

Where can I buy joint life insurance?

There are many life insurance companies that offer joint life insurance, such as:

  • A life of faithfulness. You can buy a joint permanent life insurance policy or in some cases a joint term life insurance policy.
  • Life keeper. It only offers Second Time Life Insurance. Guardian’s EstateGuard is a whole life insurance option that offers this cover.
  • New York Life. It only sells second-death or life insurance, but offers an optional rider that pays out after the death of the first policyholder.
  • State farm. Sells joint universal life insurance that builds tax-deferred cash value.

Work with a financial advisor if you are considering purchasing joint life insurance. This type of life insurance should be part of a comprehensive financial plan.

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