What is joint life insurance – Forbes Advisor

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

What is joint life insurance?

Joint life insurance is a type of life insurance that covers two people instead of one, but only pays a single death benefit if either person dies.

Bundling two policies into one can sometimes be cheaper than buying two individual life insurance policies.

How does joint life insurance work?

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

First-to-Die Community Life Insurance

With first-to-thief life insurance, upon the death of a policyholder, the surviving policyholder receives the death benefit. This allows them to be financially supported in their partner’s absence.

Once the death benefit is received, no further benefits will be paid and the surviving policyholder will no longer have life insurance.

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

Before purchasing community life insurance, research future conversion and payout options.

Joint life insurance two years ago

Second-to-die life insurance, also known as survivor life insurance, pays out the death benefit after the death of the second surviving policyholder.

This means that none of the policyholders will receive a death benefit. The payout will instead be made to the beneficiaries of the joint policyholders.

With second-to-die life insurance, upon the death of the first policyholder, the surviving policyholder is responsible for continuing to pay premiums to maintain coverage.

Second-to-die life insurance is typically used for estate planning. For example, the death benefit from a second-to-die policy could be used by adult children to pay estate taxes if both parents are deceased.

Second life insurance is not a good choice for young couples who need a payout to their surviving spouse.

Pros and cons of joint life insurance

What are the benefits of joint life insurance?

Joint life insurance has several advantages.

  • affordability. Joint life insurance can be cheaper for two people than buying two separate policies.
  • estate planning. Second-to-Die life insurance provides a death benefit that beneficiaries can use to pay funeral expenses, estate and inheritance taxes.
  • Marriage not required. Joint life insurance is not just for spouses. Many insurance companies sell community life insurance policies to life partners or business associates. If necessary, proof of joint property is required.

What are the disadvantages of joint life insurance?

Along with the advantages of joint life insurance, there are also disadvantages.

  • May cost more. Since you are insuring two parties, this can cost more than a single policy.
  • A person’s health affects the rate. Pricing is based on both people in the policy, but a second-to-die policy can be much more affordable if one person has health conditions since the price is primarily based on the healthier partner.
  • Difficult to separate in a divorce. It’s difficult to share a joint life insurance policy when a couple is getting divorced.

Who Should Buy Joint Life Insurance?

Parents and couples can take out joint life insurance to provide financial security for their families and assets. Here are some examples:

  • Second-death life insurance is a great way for a couple to provide funds that are only needed after the deaths of both people, such as B. Funds for a legacy or for children to pay inheritance taxes.
  • Parents of a child with special needs can use post-life insurance to fund a trust that provides financial support for the child after the death of the parents.
  • Business partners can choose to take out joint life insurance to protect their professional assets in the event that one partner dies before the other.

Where can I buy joint life insurance?

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

  • faithful life. You can buy a joint life insurance policy or, in some cases, a joint term life insurance policy.
  • guard life. Offers only second-to-die life insurance. Guardian’s EstateGuard is a life insurance option that offers this coverage.
  • New York life. Only sells second-to-die or survivor life insurance, but offers an optional tab that pays out on the death of the first policyholder.
  • district farm. Sells a joint universal life insurance that builds a tax-advantaged cash value.

Work with a financial advisor if you want to buy joint life insurance. This type of life insurance should be part of an overall financial plan.

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