What is a joint life insurance policy?
Joint life insurance is a life insurance policy that covers two people under one premium. It pays out a death benefit when one of the two individuals insured dies.
While buying an individual policy for each person is usually cheaper, joint life can be a coverage option for some married couples or domestic partners — for example, if one of them is not eligible for their own life insurance policy due to health or age reasons — and even for business partners who want to protect the business in case one of them passes away.
How do joint life insurance policies work?
While the two types of joint life insurance work in slightly different ways and serve different needs, one thing both have in common is that there’s some kind of financial relationship between the two parties.
Most commonly, the joint policyholders are married or domestic partners, but they can also be business partners.
The two main types of joint life insurance are:
First-to-die life insurance
Second-to-die life insurance
First-to-die life insurance
In first-to-die life insurance, the policy pays out after the first of the two insureds dies. The first-to-die option is rare but may work for people with:
Individuals in a domestic relationship or marriage who are not eligible for their own insurance for health or age reasons, but their partner is
Couples with large debts, like a mortgage
Young families
A small business ran with a partner
First-to-die life insurance is the most similar to an individual life insurance policy. It helps the surviving policyholder cover expenses after the loss of financial support. It’s also similar to individual life policies in that once the insurance company pays out the death benefit, the policy expires.
If your surviving spouse still wants life insurance, for example, they’ll need to apply for a new policy. They’ll likely pay more than they would have earlier, too, because we all become more expensive to insure as we age.
Second-to-die life insurance
A second-to-die life insurance policy, typically called a survivorship policy, pays out the death benefit once both policyholders die.
Second-to-die policies are best for couples who intend for the policy proceeds to go toward estate planning purposes, such as:
Covering estate taxes
Leaving a nest egg for their heirs
Paying inheritance taxes
Because there can be a long period between the first policyholder’s death and when the death benefit is paid, second-to-die life insurance works best as a windfall to a dependent. It doesn’t provide any income replacement for the surviving partner.
Unlike a first-to-die policy, the surviving spouse in a second-to-die life insurance contract is still responsible for paying the premiums after the other policyholder dies.
Most survivorship insurance policies are permanent life insurance, which means they never expire and usually come with a separate cash value account that earns interest over time. Permanent life insurance is significantly more expensive than term life insurance, which expires after a set term and doesn’t have cash value.
→ Read more about how life insurance works
Pros and cons of joint life insurance
Pros
It can ensure continuation of business as part of a buy-sell agreement between two business partners. If one of them should pass away, the surviving partner can use the death benefit to assist with business expenses.
It can help people with significant assets as part an estate planning strategy. A survivorship life insurance policy can help the beneficiaries organize and conserve their inheritance.
Cons
You won’t save if one spouse has health concerns. If one spouse has a medical condition or is significantly older than the other, you may pay higher premiums for a joint policy than you would separately.
It takes longer to get the death benefit. If your policy only pays out after you and your spouse die, your beneficiaries could wait years to receive insurance proceeds.
Joint life insurance complicates divorce proceedings. Though some providers offer a rider that will split a joint policy in the event of a divorce, a shared policy still adds complexity to the negotiations.
One spouse may need to buy their own policy anyway. If one spouse still needs coverage after the other passes away, they’ll need to buy a new policy, which will cost more due to changes in age or health.
Separate life insurance policies are best for the majority of people, but if you’re not sure, speaking with a financial planner or insurance professional can help you determine which type of life insurance is best for you.
Who should get joint life insurance?
Joint life insurance is less common because most couples find individual policies easier to manage. But a joint policy might make sense for:
Couples who can’t afford or qualify for two individual permanent policies
A spouse who may have difficulty qualifying for coverage alone
Couples planning to leave an inheritance for their children
If you’re considering joint life insurance, it’s best to work with an independent insurance agent and certified financial planner to weigh the options for your circumstances.
At Policygenius, our licensed experts can answer your questions every step of the way, handle paperwork, and help you secure the whole life policy that's right for your family.
→ Read more about life insurance for spouses
Do you have to be married to get joint life insurance?
You don’t have to be legally married to buy a joint life insurance policy. If you’re in a domestic partnership or even a business partnership, you could qualify, as long as the two parties involved are financially dependent on one another. Insurance companies call this concept insurable interest.
How to buy joint life insurance
If you’re seeking coverage for two people, it’s best to speak with a licensed agent to determine which kind of life insurance will be best for your needs. Policygenius has non-commissioned advisors that can recommend the best product for you based on your financial protection goals.
The application process is similar to traditional policies: