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Joint Life Insurance: What is it?

Life insurance purposes range from helping individuals plan proper burial for building parents’ and spouses’ financial assets for their survivors. Joint life insurance covers multiple people and can be structured to continue even when one policyholder passes on. The number and needs of beneficiaries are top considerations for this policy.

Joint life insurance policies explained

Joint life insurance covers multiple people and is common with married couples, although other circumstances warrant the coverage. They are typically long-term investments in the form of permanent whole or universal policies, which determine cash lump sums that may earn interest or lose value. So long as premiums are paid, coverage extends for life and will not be canceled.

Joint life insurance can also be term

Term life insurance policies are less flexible, but often more affordable. These expire after a preset period of time, usually between 10-30 years, whether the policyholder has died or not. The policyholders may recoup the whole value of payments, some of it or none depending on the type of policy.

The joint policy survivorship option

The most distinctive feature of joint life insurance is the survivorship option. It allows co-policyholders to determine if one death is sufficient to pay out the benefit or if death benefits are withheld until a second policyholder passes on.

First-to-die coverage

First-to-die coverage works closest to individual life insurance policies. When the first policyholder dies, benefits disburse, and the policy ends. Income replacement helps the surviving spouse or children thrive economically. 

Second-to-die coverage

Second-to-die life insurance continues the policy after one holder passes on. Death benefits skip the second policyholder, passing to beneficiaries upon the second death.

Considerations for and against joint life insurance

Health, age, and income are critical factors to determine if joint life insurance is ideal. As with standard life insurance, illnesses and age increase monthly premium costs. Separating policies allows a healthier or younger spouse, for instance, to save while the other spouse pays more.

For second-to-die insurance, the surviving policy holder must be able to maintain the payment schedule. If the policy lapses, all prior premium payments forfeit. This policy works best when a surviving policyholder has other assets to depend on and the insurance is intended to secure other beneficiaries financially. 

Final Takeaway

Ultimately, spouses and families must choose insurance policies survivors need to maintain their quality of lives. For instance, newlyweds’ life insurance needs change when children enter the picture. Above all, joint life insurance is for savvy long-term planners willing to pay higher premiums or forego their benefits for future generations.

Updated on April 15, 2020

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