There’s no denying that your finances change a bit once you get married. Most folks open joint bank accounts and share health insurance plans. Both contribute to the home and related expenses, and usually begin saving for the future together.
It’s easy to see why joint life insurance coverage may pique your interest, then. But is a joint policy really the right idea, or should you and your spouse stick with individual coverage?
Put simply, joint life insurance is a policy that covers two people. Just like with single life insurance policies, a joint policy offers protection for your loved ones and your assets, if you were to pass away during the coverage term.
While most life insurance can be either temporary or permanent in nature, joint life policies are intended to last the rest of your life. This means that you do not need to worry about your coverage expiring, and your loved ones will remain protected as long as the policy is kept in good standing.
There are two categories of joint life insurance coverage: first-to-die and second-to-die.
First-to-die joint life insurance covers both individuals, but pays out a death benefit after the first person passes away. In this way, it acts very similarly to a typical life insurance policy. The exception, of course, is that this policy pays out after either person dies, rather than needing to buy (and pay for) two separate policies.
A first-to-die policy is ideal for younger couples, especially if both incomes are necessary. This is often true if there are children involved, and/or shared debt such as a mortgage or credit card balances.
Second-to-die joint life insurance works a bit differently. This policy only pays out after both insured individuals pass away, rather than providing a death benefit for either person.
Because of this, second-to-die joint life insurance is not designed to support a surviving spouse or minor children. Instead, it’s most commonly designed to provide a windfall for dependent heirs, or cover expenses related to your estate.
There are a few instances where joint life insurance might be worth considering.
If one spouse can’t find an affordable policy on their own — due to previous medical issues or tobacco use, for instance — you may be able to find a joint policy that offers coverage for both of you at a lower combined cost. This is especially true with survivorship (or second-to-die) policies.
Joint life insurance might also make sense if the two of you share permanent dependents, such as a child or sibling with special needs. If one of you were to pass away, the other could continue providing care. If both of you were to pass away, though, a joint policy could provide your dependent with the long-term care he or she needs in your absence.
If there is a complex asset situation, that’s another reason to consider joint coverage. Even if your loved ones don’t need life insurance benefits for their everyday needs, the right policy can offer coverage for things like estate or inheritance taxes.
Though there are some benefits to joint life insurance, single insurance policies are — more often than not — still the better choice for most applicants.
Their benefits are situational. If you purchase a second-to-die policy, neither insured individual will receive a death benefit when the other dies. The remaining person will need to continue making premium payments on that policy, as well, in order to keep coverage active.
With a first-to-die policy, the remaining insured person will receive a death benefit when the other dies. However, the policy will terminate at that point, leaving their children and other loved ones without the protection of further life insurance coverage. Depending on the age and health condition of the remaining adult, buying a new policy could prove to be difficult and expensive.
Coverage can be limited. Not every life insurance carrier offers joint coverage, so you’ll be limited to the select companies that do sell this type of policy. Additionally, you may find that certain riders, coverage options, and even policy limits aren’t available to you when you buy joint coverage, versus when you purchase a single policy.
Divorce makes things messy. If you and your spouse purchase a joint life insurance policy and then get divorced, that policy could prove problematic. Whether you opt to keep joint coverage or cancel the policy, split any applicable cash value, and purchase individual coverage, it’s likely to result in headache and added expense.
It’s not always cheaper. It would make sense that a joint life insurance policy is cheaper than buying two separate, individual policies. However, this isn’t always the case. If you’re not saving a substantial sum, you may find that the limitations of a joint policy simply aren’t worthwhile.
Some individual life insurance policies offer spousal coverage in the form of a rider. If you really want to provide coverage for your significant other on your policy — rather than purchasing two individual policies — you might try looking for a carrier that has spousal riders.
The caveat here is that spousal coverage is often very limited. You may only be able to get a few thousand dollars in coverage with this rider, even if your primary policy’s coverage is significantly higher. While this money could still be beneficial for things like final expenses, it might not offer the protection that you and your family truly need.
Whether you purchase a single life insurance policy or go the route of joint life insurance, be sure to shop around first. Consider all of your coverage options, how much life insurance you need, and the limitations of each policy before you buy.
In some cases and financial situations, joint life insurance can be the right product for two people. However, most folks will find that two single life insurance policies can achieve the same goal… sometimes, at an even cheaper rate!
If you’re looking to buy life insurance coverage for one or more people, Fiona, in partnership with Leap Life, can help. They offer an easy and comprehensive way to get matched with personalized life insurance policy quotes from trusted, A-rated (or higher) carriers, whether you’re buying your first policy or just want to increase your coverage.
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