What is joint life insurance?

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.

You could buy individual life insurance policies, or joint life insurance might meet your needs. Joint life 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 life insurance is typically permanent life insurance, which stays in effect as long as your  premium payment is up to date, not a term life 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.

These policies can yield a tax-free death benefit and you can enhance your joint life policy’s features through various life insurance policy riders. For instance, you might add a critical illness rider, which would allow you to tap into the death benefit early if you or your partner is diagnosed with a terminal illness. (Another name for this rider is the accelerated death benefit rider, and it is available with every Haven Term policy.)

Types of joint life insurance

Joint life insurance policies aren’t all the same. For example, you can choose between first-to-die or second-to-die insurance coverage.

First-to-die joint life insurance

A first-to-die joint life insurance policy works mostly the same way single-person coverage works. When one partner passes away, the beneficiary (which, in some cases, might be the surviving joint life insurance policyholder) receives a death benefit from the policy. The surviving spouse can use the proceeds toward funeral expenses, a mortgage, day-to-day living expenses — in any way the beneficiary chooses.

The important thing to know is that once one person covered by the joint life policy passes away, no further benefits are issued. If you’re a surviving partner, 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 life insurance

A second-to-die joint life insurance policy, also called a survivorship life insurance policy, works 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 partner, other than the knowledge that their beneficiaries will receive the proceeds from the policy in the future. The surviving partner is still responsible for paying the premiums to maintain coverage.

Who may want joint life insurance?

Joint life insurance may be an option for newlyweds or married couples who don’t have life insurance coverage in place yet. A first-to-die policy could ensure that a surviving partner (named as the beneficiary) 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 joint 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, joint life insurance might be less expensive than two separate permanent life insurance policies.

Weighing the pros and cons

One important thing to consider with any life insurance policy is cost. A joint life insurance policy may be less expensive than two separate permanent policies if you and your partner are young and healthy. On the other hand, a joint life insurance policy could cost more if you’re healthy, but your partner has a health issue, or vice versa.

For most people, two separate term life insurance policies will cost less than a joint permanent policy, particularly if the face values are equal. In fact, you can usually buy more coverage for a lower price if you opt for term life insurance. Term life insurance can provide a financial safety net during the years you need it the most, such as while you’re still paying off your mortgage or financing your children’s education.

Something else to consider is what happens to the policy if you and your partner purchase joint life insurance and then get divorced. If your joint life coverage policy doesn’t include a rider that allows you to split it in two in the case of divorce, deciding what to do with your coverage could get messy. Not only that, but you could take a financial loss if you have to cancel the policy.

Look carefully at what you get, and imagine possible outcomes. Sorry to be morbid, but we need to point out that if a married couple with a joint life insurance policy dies together in an accident, there is only one payout.

Look at all the options for getting insured

Joint life insurance may work well in some situations, but it’s important to check all the angles first. You may find that buying individual term life policies is a better fit for your budget and coverage needs. As you compare joint and single life insurance, remember to factor in:

• Your current age and health
• Your partner’s age and health
• The amount of coverage you estimate you’ll need
• How long you need the coverage to stay in place
• Whether you’d like the option to accumulate cash value
• The costs of getting insured for term vs. permanent coverage

Term life is generally the more affordable choice, particularly when you’re young and in good health. Before committing to any life insurance policy for yourself and/or your partner, run the numbers.

Calculate your life insurance needs first to get a sense of which death benefit is appropriate. Then, get a quote to estimate your life insurance coverage rates.

Buying life insurance, as a married couple or other partnership, is an important step, especially if loved ones depend on you financially. Understanding how joint and single life insurance policies can meet your needs can guide you toward the coverage that’s the best fit.