Joint Life Insurance Explanation

This is part ten in a series of articles explaining the various types of life insurance products. To start at the beginning please click here.

Joint life insurance allows two or more people to combine what would equate to two individual life insurance policies into one policy. There will be one premium paid, one set of fees, and one death benefit, but there will be two lives insured. These types of policies are usually used by spouses or business partners who have combined interests and finances.

There are two main types of joint life insurance: first-to-die life insurance and second-to-die life insurance. With a first-to-die life insurance policy, the insured group of people has only one policy, and a life insurance benefit is paid when the first of the insureds dies.

This type of policy can be great for businesses with partnership arrangements. The business can pay the premiums as a cost of doing business. If one of the partners dies, then the remaining partners can use the life insurance benefit to buy the deceased partner’s share of the business from the family or estate that inherits it. Here is a link to an interesting article in the New York Times that addresses the subject of partnerships and how to go about protecting your interests and it even specifically mentions this type of joint life insurance arrangement (Click here to read the article).

A first-to-die policy can also be good for a married couple that wants to have a similar life insurance policy on both partners. This allows the couple to essentially combine two separate policies into one and save on some of the administration charges from the life insurance company.

You need to be careful when shopping for first-to-die life insurance policies. They are not very common and so the rates may be less competitive. You may end up finding that it is cheaper to buy two single life policies than one first-to-die policy. You also need to assess the life insurance needs that the surviving partner will have. If the surviving partner will need to keep the life insurance after the death of the first partner, then individual policies may be the way to go. Another alternative is that some first-to-die policies have optional riders that allow you to convert the policy into a single life policy for the surviving partner upon the first death.

With a second-to-die life insurance policy the life insurance company pays the benefit amount after both insured lives have passed away. These plans are usually purchased by spouses and are usually used for estate planning purposes. Second-to-die life insurance premiums are much lower than similar individual life insurance products since it requires the death of two people instead of just one. If you think that you need a second-to-die life insurance policy, then I suggest that you consult with a trusted, professional financial advisor.