What is Joint Life Insurance?

When you buy life insurance, you’re typically buying coverage only for yourself. But if you’re married, you have a life partner or you co-own a business with someone else, you may be able to buy joint life insurance, which insures both of your lives.

Joint life insurance is a relatively rare type of life insurance policy that covers two people instead of one person. It’s often used by business partners so that when one person dies, the surviving partner can use the death benefit for business expenses. Spouses or domestic partners can also obtain joint coverage. These types of policies are sometimes referred to as married couple life insurance.

Some insurers offer joint term policies, which only last for a specified period of time. But most joint coverage is issued as permanent life insurance, meaning the policy will typically last for a lifetime and also builds cash value. There are two basic types of joint life insurance: first-to-die and second-to-die policies.

First-to-die joint life insurance is a policy that pays a death benefit to the surviving partner or spouse when the other one dies.

If you have first-to-die joint life insurance and your spouse or partner dies, you’d have to apply for a policy on your own if you still need life insurance coverage. This could be difficult if you’re significantly older than you were when the joint policy was issued or if your health has declined.

Second-to-die joint life insurance is also known as survivorship life insurance. It pays a death benefit only when both people covered by the policy have died.

If you have survivorship insurance and your spouse or partner dies, you won’t receive a death benefit. You will most likely also need to continue paying the premiums to keep the policy in force. When you die, the death benefit will go to your life insurance beneficiaries.

Some wealthy couples choose a second-to-die policy to ensure there’s sufficient cash to cover probate expenses and estate taxes. Couples may also choose survivorship insurance to provide a death benefit for a child with a disability or leave a financial legacy for a charity.

As with other life insurance policies, eligibility for joint life insurance depends on a number of factors, including your age and health (and your partner’s or spouse’s) and the amount of coverage you’re applying for.

Someone who’s older or has health problems may qualify for second-to-die life insurance when they wouldn’t have been eligible for a stand-alone policy because the insurer probably won’t have to pay a death benefit until the healthier person dies. But the opposite can also occur. A spouse’s or partner’s health problems, age, or tobacco use could make you eligible for less coverage or drive up your premiums, especially if you’re seeking a first-to-die policy. Still, a first-to-die policy may make sense for couples who seek to fulfill a specific obligation, like paying off a mortgage or funding a child’s college, rather than providing income replacement. That’s because a first-to-die policy is typically cheaper than the cost of paying for two separate single-life policies with the same death benefit.

With a second-to-die policy, pricing is more likely to reflect the life expectancy of the younger, healthier person. With both types of married couple life insurance, the insurer has to pay a death benefit at some point. But because of the time value of money — essentially, a dollar today is worth more than a dollar at some point in the future — insurers would rather pay out a death benefit as far out into the future as possible.

Joint life insurance often helps couples qualify for lower premiums than they’d pay for individual policies with the same death benefit. The reason, of course, is that joint life insurance covers two people but only pays one death benefit.

Say you’re considering two single policies that would each pay a $500,000 death benefit or a joint life policy that would provide one $500,000 benefit. The joint policy would most likely be cheaper because the insurer will only need to pay one $500,000 benefit instead of two benefits totaling $1 million.

Joint coverage could also help couples qualify for a higher death benefit. Suppose you want to leave a $1 million death benefit, so you shop your options for two single $500,000 policies vs. a $1 million joint life policy. The insurer’s actuarial tables show that your life expectancy is 20 years, compared to 30 years for your partner or spouse.

The insurer would expect to pay $500,000 in 20 years, then another $500,000 in 30 years, or $1 million total. But with a second-to-die policy, the insurer estimates that it won’t have to pay any of the $1 million benefit for 30 years.

To find out how much coverage you’d qualify for, you’ll need to contact a life insurance agent. Joint policies are a niche product. Few carriers offer it, let alone offer online quotes.

Advantages of joint life insurance

• Joint life insurance is usually cheaper than buying two separate policies with comparable death benefits.

• A second-to-die policy could help an older, less-healthy person get coverage when they couldn’t qualify on their own. 

Disadvantages of joint life insurance

• Deciding how to split the policy could be complicated if you get divorced and your policy doesn’t include a rider that allows you to split it into two separate policies.

• Relatively few options are available for joint life policies. 

• Joint life insurance is usually issued as a permanent life insurance policy. Permanent life insurance is typically far more expensive than term insurance. While two separate permanent policies may be more expensive than a joint life insurance policy, two separate term policies could still be cheaper.

A joint life insurance policy may be worth it in a few specific circumstances. For example, if you each want to provide the other with a $100,000 death benefit to pay off debt, a joint first-to-die life policy could be cheaper than two $100,000 policies because the insurer only has to pay one death benefit. If one person can’t qualify on their own because of an underlying health issue, a second-to-die policy may be a way to obtain coverage. But before you shop for joint life insurance, be sure to look at the costs of obtaining two individual policies, as well as how much coverage you’d each qualify for.

For couples who can’t afford two separate policies, first-to-die joint life insurance may make sense, especially if both spouses work and earn similar amounts. If one spouse dies, the surviving spouse can use the death benefit for expenses or to pay off a significant liability, like a mortgage.

A second-to-die life insurance policy is only worth considering if you have specific estate-planning needs, like you’re worried about estate taxes, you want to leave a benefit for a child with a disability, or you’re building a financial legacy for your heirs or a charity.

• Buy individual term policies for each person. The simplest solution is for each person to apply for individual term life policies, particularly if both people are younger and relatively healthy. Term life insurance is sufficient for most families, but if providing a death benefit to your heirs is important to you, you could also shop for individual permanent policies.

• Purchase a life insurance policy with a spouse rider. A spouse rider is an add-on feature you can purchase for an individual policy. It pays a death benefit if your spouse dies while the rider is in effect. The death benefit for this life insurance rider will typically be lower than you’d get if your spouse had their own policy. However, if they can’t qualify for life insurance, a spouse rider offers some protection.

• Guaranteed issue life insurance. If one person can’t qualify for their own policy and you’re worried about paying for final expenses, guaranteed issue life insurance is an option. These policies cover applicants regardless of age or health, but the death benefit is minimal.