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Everything Together
When you’ve been with someone for so many years, it may seem like you have everything together. It could be children, houses, cars, bank accounts, or businesses, but how about life insurance?
A joint life insurance policy is a practical option for married couples, domestic couples, and business partners. It is a single policy that covers two people for the price of one person. Each partner gets life insurance coverage but only pays a single premium and receives a single death benefit when the other dies.
There are two different types of joint life insurance. They both pay a single death benefit but in different ways.
First-to-Die Joint Life Insurance
A first-to-die policy provides a surviving policyholder a death benefit after the other policyholder dies. The payout can help the surviving partner with financial support when their partner is gone.
The downside to this type of policy is that once the death benefit is received, there are no additional benefits paid in the future. The surviving partner will no longer have life insurance coverage. Some companies may offer the ability to convert the policy to an individual policy with the same death benefit. However, this change might come with a higher premium.
Second-to-Die Joint Life Insurance
With a second-to-die life insurance policy or survivorship life insurance, the death benefit does not get paid until both policyholders pass away. Therefore, the policyholders are not receiving the payment, but a designated beneficiary of the joint policy does.
For this type of joint life insurance, the policyholder still living must continue paying the premiums if they want to maintain their coverage. This type of insurance is a good option for estate planning but not ideal for young couples who need the death benefit to continue surviving financially.
Pros and Cons of Joint Life Insurance
Pros
More affordable
Having a single life insurance policy may be more affordable than paying for two separate individual policies.
More control
In a second-to-die policy, the surviving partner can tap into the cash value if needed or make changes to the beneficiary designations.
Cons
Purchasing expensive additional coverage
If two people were to have a first-to-die policy, the first person could die at an old age leaving the survivor without coverage. Additionally, the survivor is now elderly and presumably in poorer health which causes premiums to rise higher for new coverage.
Higher rate for those with health issues
Just like a group policy, the health of both individuals determines the rates for a joint life insurance policy. The policy rates may rise if one partner is a smoker or in poor health. A second-to-die policy determines the rate based on the healthier partner and may be more affordable for someone with an unhealthy partner.
Whatever coverage you decide to get, individual or joint, you should always have protection for the ones you leave behind.
While you shop for the perfect life insurance policy, don’t forget to get some helpful additions. Check out the most common life insurance riders HERE.
Life Insurance Questions?
We hope that this information on joint life insurance is useful to you.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage at (888) 539-1633 to speak to one of our Life and Annuity experts or leave a comment down below.
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