What is a Joint Life Insurance Policy?

Rebecca Parson
Rebecca Parson

Rebecca Parson

Author

Rebecca Parson is a financial and tech writer with 10 years of experience writing about topics such as life insurance, commodities investing, and the SaaS industry. She has a master’s degree from Johns Hopkins University and a bachelor’s degree from the University of Mary Washington. Her writing has appeared at money.com, sacbee.com, cart.com, herodevs.com, blanchardgold.com, and more.

Brian OConnel
Brian OConnel

Brian O'Connel

Contributor

Brian O’Connell has been a contributing writer for U.S News & World Report since 2016. A former Wall Street bond trader and the author of two best-selling books; “The 401k Millionaire” and “CNBC’s Creating Wealth”, he has 20 years experience covering business news and trends, particularly in the business and financial sectors. He believes education is the best gift a financial consumer can receive – and brings that philosophy to every story he writes. His byline has appeared in dozens of top-tier national business publications, including CBS News, Bloomberg, Time, MSN Money, The Wall Street Journal, CNBC, TheStreet.com, Yahoo Finance, CBS Marketwatch, and many more.

By Rebecca Parson, Brian O'Connel
Author, Contributor, Life Insurance

Key Takeaways

  • Joint life insurance is a life insurance policy for two people, usually couples or business partners.
  • It pays the death benefit upon the first or second policyholder’s death.
  • Joint life insurance can be more cost-effective than two individual whole life policies.
  • Joint life insurance is usually a whole life policy and, less commonly, a term life policy.
  • If you don’t need your joint life insurance policy anymore, you can sell it in a life settlement.

What Is Joint Life Insurance?

Joint life insurance covers two people instead of one and people often use it for estate planning or covering a spouse who can’t qualify for life insurance on their own. Joint policyholders don’t have to be married, but most people who buy these policies are spouses or domestic partners. Sometimes business partners use it to fund the company if one of them dies.

Joint life insurance is a specialized product, so fewer insurers offer it. Among those that provide joint policies, most don’t offer term life insurance because most couples prefer long-term protection: if the policy expires before one partner dies, there’s no payout.

In general, joint life is less expensive than buying two individual policies because you’re paying the insurer for two people but only one payout.

What Are Some Different Types Of Joint Life Insurance?

There are different variations of joint life insurance, including:

  • First-to-Die: In this type of policy, the death benefit is collected upon the first person’s death. This could be useful for couples who have dependents and want to provide financial stability if one partner dies. Once the death benefit is paid, there’s no continuing coverage for the remaining partner, who will have to get a new life insurance policy.
  • Second-to-Die: Here, the death benefit is collected upon the second person’s death and goes to the joint policyholders’ beneficiaries. The payout is often used to cover estate taxes or other expenses after both individuals have passed away.
  • Joint Term Life: Similar to individual term life insurance, this type of policy provides coverage for a specific period and pays out the death benefit upon the simultaneous death of both individuals.
  • Joint Whole Life: This permanent life insurance policy covers two people and builds cash value over time. The death benefit is paid out upon the first person’s death, providing financial security for the remaining individual.

Who’s Eligible for Joint Life Insurance?

Joint life insurance eligibility hinges on various factors, including your age, health, and the coverage amount you seek, as well as those of your partner or spouse. Someone older or with health issues might qualify for second-to-die life insurance even if they wouldn’t for an individual policy since the insurer likely won’t pay out until the healthier person dies. 

However, if your spouse or partner has health problems, is older, or uses tobacco, you might qualify for less coverage or face higher premiums. This is especially true with a first-to-die policy. 

Despite this, a first-to-die policy can be ideal for couples aiming to meet specific financial obligations, such as paying off a mortgage or funding a child’s education, rather than providing income replacement. This is because a first-to-die policy typically costs less than two separate single-life policies with equivalent death benefits.

For second-to-die policies, pricing often considers the life expectancy of the younger, healthier individual. With both types of joint life insurance, the insurer will eventually pay a death benefit. However, due to the time value of money (a dollar today is worth more than a dollar tomorrow) insurers prefer to delay this payout as long as possible.

Pros and Cons of Joint Life Insurance

ProsCons
Cheaper than two individual permanent policiesComplicated during divorce
Helps with estate planningHealth of both individuals impacts price
Don’t have to be marriedCost compared to term life insurance

What Are the Benefits of Joint Life Insurance?

The benefits of joint life insurance are:

  • Cost-Effectiveness: Joint life insurance generally costs less than two individual policies, offering significant savings for couples.
  • Estate Planning: Second-to-die joint life insurance can help beneficiaries pay for estate taxes, inheritance taxes, and funeral expenses.
  • Don’t Have to Be Married: Couples, business partners, or any two people with a shared financial interest can benefit from joint coverage, regardless of marital status. You may need to give evidence of shared finances.

What Are the Disadvantages of Joint Life Insurance?

The disadvantages of joint life insurance include:

  • Divorce: Joint life insurance is complicated to separate if a couple decides to divorce and the policy doesn’t have a rider that allows it to be split in two.
  • Health: Pricing is based on both people on the policy, but a second-to-die policy can be much more affordable when one person has health issues because the price will be based mostly on the healthier partner.
  • Cost Compared to Term: Joint life insurance is typically provided as a permanent life insurance policy, which costs more than term life insurance. Although two individual permanent policies will cost more than a joint permanent policy, purchasing two separate term policies might still cost less.

Who Should Buy Joint Life Insurance?

Parents and couples often purchase joint life insurance to safeguard their families and estates financially. One example is second-to-die life insurance, which provides funds only after both policyholders have passed away. This can help cover estate taxes or create a legacy for children.

Parents of a child with special needs can use second-to-die life insurance to fund a trust, ensuring the child’s financial support after both parents are gone. 

Additionally, business partners may opt for joint life insurance to protect their professional assets if one partner dies before the other. This helps the surviving partner manage the business without financial strain.

Is Joint Life Insurance Worth It?

If one person isn’t eligible for individual life insurance due to health issues, a second-to-die policy might provide a way to get coverage. Before deciding, however, compare the costs and coverage of two individual policies to see if they better meet your needs.

For couples who want to save money on permanent life insurance coverage for both people, a first-to-die joint life insurance policy might be a practical solution. If one partner passes away, the death benefit can cover living expenses or significant debts, such as a mortgage.

Consider a second-to-die life insurance policy if you have specific estate-planning goals, like addressing estate taxes, providing for a family member with a disability, or funding a charitable cause.

3 Alternatives to Joint Life Insurance

Before buying joint life insurance, consider these three alternatives:

  1. Individual Term Policies for Each Person: The most straightforward approach is each individual getting their own term life insurance, especially if both are young and in good health. Term life insurance usually meets the needs of most families, but if you want a death benefit for your heirs, consider individual permanent life policies as well.
  2. Life Insurance Policy With a Spouse Rider: A spouse rider is an additional feature you can add to an individual policy. It provides a death benefit if your spouse dies while the rider is active. The death benefit for this rider is typically lower than that of a separate policy.
  3. Guaranteed Issue Life Insurance: If one person isn’t eligible for their own policy, you may want to look into guaranteed issue life insurance, which doesn’t require a medical exam or questionnaire. However, these policies come with a two to three-year waiting period, cost more than term or whole life insurance, and have a minimal death benefit.

Can I Sell My Joint Life Insurance Policy As A Life Settlement?

Yes, you can sell your joint life insurance policy as a life settlement. A life settlement is when a policyholder sells their life insurance policy to a third party for a one-time cash payment that is more than the policy’s cash surrender value but less than its net death benefit. A buyer typically pays less for a second-to-die joint life policy than a universal life insurance policy

After the sale, the new owner pays all future premiums and becomes the policy beneficiary. For joint life insurance policies, both policyholders’ consent is necessary to initiate the sale. Make sure you understand life settlement taxes before selling, as well as your eligibility for government assistance programs. Consult a financial advisor or insurance professional before proceeding with a life settlement.

FAQS About Joint Life Insurance

What Is Joint Life Insurance?

Joint life insurance is a life insurance policy for two people, usually couples or business partners.

What’s the Difference Between Joint Life and Survivorship Life?

Survivorship policies, also known as second-to-die life insurance, are a type of joint coverage that provides a benefit only after both individuals have passed away.

Do You Have to Be Married to Apply for Joint Life Insurance?

No, you do not have to be married to apply for joint life insurance — domestic partners, business partners, or other people with shared financial interests can apply.

Can I Sell My Joint Life Insurance Policy?

Yes, you can sell your joint life insurance policy in a process called a life settlement.

In Conclusion

Joint life insurance is a versatile option for couples and business partners seeking financial protection. Its cost-effectiveness and estate planning benefits make it a valuable choice, but it’s essential to consider the specific needs and circumstances of both policyholders. Before deciding, compare different policy types and consult with a financial advisor to ensure the best coverage for your situation.

If you want to sell your joint policy, contact us at Beca Life to discuss your options and whether a life settlement broker or provider is a better option for you.

Sell your life insurance policy for cash.

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