Joint Life Insurance

    Joint Life Insurance: Is It Right For You And Your Spouse?

    For many young couples looking to start a family, it makes sense to consider buying a joint life policy. This type of life insurance provides the surviving spouse some form of financial security if their partner passes away.

    In this guide, we'll talk about the pros and cons of buying joint life insurance. By the end, you'll know if this is the right insurance product for you and your partner.

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    What Is Joint Life Insurance?

    In a lot of ways, joint life insurance is similar to standard individual life insurance. It's a risk management vehicle that allows beneficiaries to claim a death benefit when the insured person passes away within the coverage period.

    The main difference is that joint life insurance pays out a single death benefit for two people. So, if one person dies, the surviving spouse can make a claim and receive the policy's face value. They can use that money for mortgage repayments, funeral expenses, and ongoing bills.

    One of the key traits of joint life policies is that two persons are insured for the same amount. So, regardless of which person earns more money, you'll receive the same death benefit.

    Another key trait of joint policies is that they can have two owners. That gives both of them the right to make changes to the insurance contract and ensure that each of their interests is represented equally.

    In case you're only interested in purchasing one life insurance policy, consider joint life insurance. It offers extra protection compared to just buying an individual policy to cover the main breadwinner. Even when a stay-at-home-dad or mom passes away, the surviving spouse can use the death benefit to pay for childcare later on.

    Types Of Joint Life Insurance

    Joint life policies come in two types, and they differ depending on the time they pay out the death benefit. Here is a quick description of both.

    First-To-Die Life Insurance

    For first-to-die insurance policies, the insurer pays out a death benefit after one spouse passes away. However, the surviving spouse will no longer have coverage after the first death. They'll need to buy additional insurance in the event that they still require coverage.

    Even if both spouses pass away at the same time, only one lump sum death benefit will be paid out. In this case, their beneficiaries, like their children, can file a claim.

    One advantage of first-to-die life insurance is that the survivor can use the death benefit for their everyday needs. This is usually best for dual-income households that are at risk of facing financial hardship in case one breadwinner passes away.

    Keep in mind that a first-to-die rider can be added to an existing whole or term life policy. This allows you and your partner to get coverage at a lower rate without purchasing standalone joint insurance. Ask your agent to see if your life insurance company offers this option.

    Second-To-Die Life Insurance

    Second-to-die insurance products (also known as survivorship policies) pay out a benefit after both partners pass away.  For this type of life insurance, the proceeds will be given to their heirs.

    Since the death benefit is not paid out until both insured persons pass away, this product is not ideal for a couple that relies on each other's income. Instead, it's a good choice if you and your partner want to leave your heirs with a sizable inheritance.

    One advantage of getting second-to-die life insurance is that your children receive the death benefit tax-free. Proceeds from this type of insurance don't have to go through the same legal processes that come with inheriting their parents' estate, for example.

    In some cases,  children can even use the money from second-to-die life insurance to pay for estate tax. That way, they won't have trouble getting access to the assets you leave them after you and your partner pass away.

    Keep in mind that for a second-to-die policy, the survivor will still need to continue paying the premiums even when the first policyholder dies. If they fail to pay premiums to the insurance company, their policy will lapse and they can risk losing their coverage.

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    Single vs Joint Life Insurance

    When you're shopping for life insurance, you should carefully evaluate if it's wiser to buy two separate life products, or if it's better to get a joint life insurance policy. Here are some of the factors you should consider.

    Rate Of Premiums

    If you're on a budget, getting a joint policy may be within your best interest. That's because you only need to make one payment rather than paying for two separate policies.

    Make sure to review life insurance quotes for two separate policies and a joint life policy and see which one offers you more value for your money. You can ask your insurance agent to get a quote for multiple life insurance policies.

    Flexibility

    Joint life insurance policies don't enjoy the same level of flexibility as two separate life insurance policies. For example, if you have a joint life insurance policy, you and your spouse get the same coverage amount, regardless of who is the main earner. In comparison, if both of you have an individual insurance policy, you can request higher coverage for the main breadwinner.

    Extent Of Coverage

    With a first-to-die joint policy, the payout only comes after the first person passes away. After this, the surviving spouse will lose their insurance coverage. If they need additional insurance, they will need to buy a new single policy. This might be a little complicated years later, especially if their health has deteriorated.

    Compare this to couples who each have two separate products. Each time one person passes away, their beneficiaries have the right to claim a death benefit.

    Is Joint Life Insurance Right For You?

    A joint life policy is most ideal for couples who have children who depend on them financially. Even if you are the sole breadwinner, getting a joint life insurance policy to cover your spouse will protect your family from the financial hardship that comes with the loss of your kids' primary caregiver.

    But while joint life insurance products are designed for spouses, you don't necessarily have to be married to purchase them. As long as you're two people with the same financial obligations, this can work for you. For example, you can be co-parents or business partners.

    However, keep in mind that the price of a joint life policy can increase if you or your partner is in poor health. You might want to check if it's cheaper for the healthier person to purchase an individual policy for themselves instead.

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    Frequently Asked Questions

    Buying a life insurance policy that covers two people can be a little more complicated than getting two individual policies. Let's answer some of the most common questions about this product.

    How much coverage do you need?

    Life insurance is meant to provide financial coverage for the needs of dependents. So, the coverage will depend on your individual circumstance.  You can ask your agent or financial advisor for advice regarding this matter.

    In general, you should consider how much money your family will need if something untoward happens to one of you. Take into account the outstanding balance on your mortgage, your other debts, and other bills. You should also factor in the additional cost of childcare for your family if one parent were to pass away.

    How long does a joint policy last?

    Some types of joint life insurance policies provide permanent coverage. Depending on the policy you choose, this type of insurance may have the ability to build cash value and the potential to earn dividend payments.

    Joint life insurance can also work like term life insurance in that they only provide cover for a set amount of time, like 10 or 25 years. Like standard term life insurance, this will not accumulate a cash value.

    What happens to joint life insurance after a divorce?

    In the event that you split with your partner, it's unlikely that you'll be able to ask your life insurance company to divide your joint insurance policy. You'll likely need to cancel the contract and set up separate policies for two people.

    With that said, joint life insurance is usually more suitable for a couple that's already made a financial commitment together. For example, if you have a house together, a joint life policy can help the surviving partner pay off their spouse's share.

    Some life insurance companies offer a separation option, allowing you to split the policy without having to go through a new application process. Make sure to ask your insurance agent if this is an option before you buy the policy.

    Final Thoughts

    Buying life insurance is often a very good choice for a young couple, business partners, or co-parents. While they have the option to apply for two separate policies, buying joint insurance allows them to save money on premiums.

    If you want to learn if a joint life policy can meet your needs, contact Wesley Insurance, LLC. We'll educate you about the types of policies that are available from various insurance companies so you can pick the one that best meets your needs as a couple.

    Written By Cameron McDowell
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