Joint Life Insurance: Everything You Should Know

The dependents who rely on you, ever wondered what would happen to them once you’re gone?

You know old age is no one’s best friend, you’re able to earn well today because you’re healthy- maybe 10 or 20 years down the road you wouldn’t be. And your children might not be able to earn enough to support the whole house.

What should you do?

One common answer to this question is to have life insurance. 

There is a type of life insurance that allows two people to be insured under one policy! This is called Joint Life Insurance!   

Individual life insurance may be a hassle when it comes to insuring two people separately and may also be expensive for some. In such a case people opt for a joint life insurance policy. 

Here’s everything you need to know.

Joint Life Insurance Definition

A joint life insurance policy aims to cover two people under one policy- usually husband and wife- and offers a death payout. Opting this option is relatively cheaper for people rather than applying for two different policies for two people. 

The common notion of this policy works on a ‘first-to-die’ basis, HOWEVER, there is also a ‘second-to-die’ type as well. We’ll talk more about the types in detail later on.

When two people move forward to get a joint life insurance policy, they are required to fill in an application. The process is the same as all other life insurance policies: permanent coverage as long as all premiums are paid. 

Who may want a Joint Life Insurance Policy?

Elder couples who are now at the brink of retirement usually opt for joint ownership of life insurance policy. One reason is that since the cost is lower than having two people insured separately, they can easily afford to pay premiums on a monthly or annual basis. 

If one person of the two insured dies, there is immediate death payout and the policy ends. The other spouse does NOT get anything in return. 

It is also very commonly used by business partners; if two business partners get themselves insured, upon their death the payout can be used to pay off any business liabilities like debts and remaining payments. This actually works well in a corporate sector because when two people die, that is when successors of the business (beneficiaries) get a death payout to settle liabilities. 

Types of Joint Life Insurance

It is important to talk about the two types of joint life insurance, because it is very much likely that your insurance company will give you an option to choose between the two. 

Traditional Joint Life Insurance First-to-die

This life insurance policy is the type which focuses on the first policyholder who dies, just like the name suggests. The death payout is immediately paid if you choose this policy and the spouse that is alive gets to use the death benefit as they are likely to be assumed as beneficiary. 

The policy is automatically terminated, meaning the other spouse is no longer insured. So when they die, of course there is no death payout.

Couples who have a whole life and future ahead of them are usually the ones who opt for this type of policy. In case one of them dies, the other has an option to use the death payout to raise the family and ease their financial burden. For newlywed couples there are a lot of expenses that they have to go through in their lives; like downpayment of a new house, tuition of children, mortgage etc- so if one person dies, the other might not be able to run the house with the limited amount of income they earn. So in such a case thinking about the financial stability of your spouse is an important decision to make.

At what point are Death Proceeds paid in a Joint Life Insurance Policy?

When the first insured person dies.

The death benefit can be used by the other spouse, and if they wish, they can opt for an individual policy to cover them. 

Joint Survivorship Life Insurance (Second-to-die)

Also known as joint last to die life insurance policy, this is the other type of a joint life insurance policy which reserves the death benefit until both the insured people die. In this type of life insurance, children of the couple are likely mentioned as beneficiaries so when both the insured people die, that is when the death payout is paid.

If one person dies first, the policy DOES NOT lapse so the spouse that is alive has to still continue to pay premiums. And there is of course no gain on the first death. It is after both people have died, the policy is terminated and beneficiaries are given a death benefit.

Couples who are nearing their retirement or very old and sick usually opt for this kind of policy, where they want to create a financial legacy for their children. The death payout is given upon the death of both the insured people which can be later used by the beneficiaries. 

Joint Term Life Insurance

A joint term life insurance policy usually operates on a first-to-die basis, meaning the policy will end and the payout will be granted just as the first insured person dies. 

A joint term life insurance is not permanent, couples are to opt for a joint life policy for a specific term like a number of years. With low premiums that come with this type of policy, couples can actually afford to pay premiums.

A joint term life insurance policy sometimes gets messy when the couple decides to separate. This would not only invite lots of legal action but also the decision of who will continue to pay premiums. Of course, to keep the policy alive, one spouse has to continue paying premiums so that there is a death payout transferred to the beneficiaries. 

If the term ends and the second policyholder is still alive, they will have to opt for an individual life insurance plan that covers them for the rest of their life. They could also opt for a term life insurance plan depending upon their need and how they want the policy to work for them.

Level Term Rider

This feature is usually associated with a joint term life insurance policy which gives either insured an additional coverage if a level term rider is attached with their policy. This coverage shall be purchased by BOTH insured people that provides additional coverage up until the age of 95.

A joint life term life insurance policy can be converted to a joint whole life insurance policy up until the age of 75.  

Joint vs Single Life Insurance Policy

Many people who come across the knowledge of joint life insurance policy often find themselves comparing it with single life insurance policy.

Which one is better? Which one is cheaper? Which one is likely to secure our future?

So many questions! And you may be able to answer these based on this section of the article.

A single life insurance policy covers one single person at one time. There are two ways to go about it:

• A term life insurance policy where the person is insured for a specific number of years referred to as the ‘term’ and has to pay very affordable premium rates each month or year. This type of policy only gives a death benefit to the beneficiaries (spouse or children) mentioned in the start of the contract. 
• A whole life insurance policy covers the policyholder for their whole life, this permanent life insurance policy not only has a death benefit but ALSO an accumulated cash value that the person can borrow or withdraw to use during their life. The premiums are of course higher because this is a lifetime coverage but the lump sum amount of the cash value can be used during the policyholder’s life.

So now you ask, which one is better?

Well, there are many factors that decide which one works out best for you. 

A joint life policy gives you limited protection, because in case your spouse dies first, you are no longer insured. You can only use the death payout now. Whereas a single life insurance policy offers more protection because both of you are separately insured- so if one person dies, the other still has cover.

This means that the policy will pay you TWICE! Once when your spouse dies, and once when you die.             

People can have many reasons to opt for a joint life or single life insurance policy. It solely depends on your needs and requirements and which one suits you better according to your future plans.

Joint Universal Life Insurance

Where a joint life insurance ONLY has a death payout when either the first insured, or both of them die (depending upon the type of insurance you select), a joint universal life insurance policy ALSO has a cash value component.

A cash value component is accumulated over time through the regular payment of your premiums. This can be used any time by the policyholder during their life. 

So if you have unexpected expenses in the duration of your policy, you can withdraw the money or borrow it against loans to pay off your debts. However, with loans and portion withdrawals of your cash value, your death benefits also decrease! So make sure you don’t keep withdrawing because it will in return affect the amount your beneficiaries will be getting.

Having a lifetime coverage duration, anyone from the age of 18-85 is eligible to opt for a joint universal life policy.

Joint Life Insurance Companies

Choosing an authentic joint life insurance company is very important! Make sure you have precisely gone through lists of insurance companies before deciding on which one to choose.

Here are two companies that specialize in joint life insurance policies:

1. LIC Joint Life Insurance Policy: An Indian joint life insurance company that specifically focuses on joint life insurance plans, under the Jeevan Saathi program.
2. State Farm Joint Universal Life Insurance

Joint Life Insurance Quotes

People need a proper insurance plan that works for them and secures the future of their families. For that, an insurance quote is what is needed. It is important to search for the right companies that don’t charge you and arm and leg for a joint life insurance plan- because these are relatively cheaper than separate insurance plans for two people!

We all want a huge payout at the end, and opting for a $200,000 policy plan may sound great. But always remember, the more cost coverage that you go for, the more expensive your plan will be. When you choose a high payout plan, you will have to pay a bigger amount of monthly premiums.

Being cost effective in your plan is very important! There are many joint term life insurance quotes online which companies use to customize rates for you. You are required to enter all your basic details in a calculator tool which will give you a close estimate of what your ideal plan must look like. 

Note: Sample quotes have been extracted online, courtesy of Money Supermarket.

And at the end of the day, a cheap joint life insurance plan shouldn’t be your main goal. Evaluate your financial condition, see which amount of coverage is enough for you, plan ahead!  

The Final Word

For two people, joint life insurance sounds like the best option: lifetime coverage, low cost of insurance, immediate death payout when the first one dies (unless you choose otherwise). But, it’s not all rainbows and butterflies! 

Do you really need joint life insurance? Would you be better off with a term life insurance or a whole life insurance plan? Will you be able to pay premiums even after you’re retired? Think of all these questions and then look for joint life insurance companies that help you out with the most suitable plan. The key is to plan ahead and make wise decisions!