Joint Life Insurance: Understand Your Options

There are three types of joint life insurance policies.

  • A first-to-die policy pays out after the death of the first policy holder.
  • A second-to-die policy pays out after the death of both policy holders.
  • A joint life with last survivor annuity ensures an income for life that can’t be outlived.

If you’re married or in a committed relationship, it’s logical to want to take care of your significant other and any children in the event you pass away. One option you can consider is a joint life insurance policy. So how do you know if it’s the right choice for you?

What is joint life insurance?

According to NerdWallet, joint life insurance allows you to insure your life and that of your spouse or partner under one policy. There are three types of joint life insurance:

  1. First-to-die: This type of policy pays out after the death of the first policy holder, which can help the surviving spouse pay off a mortgage or other debt. It also expires, meaning that the second policy holder is not insured anymore. There are few life insurance companies that sell this type of policy, so it might be challenging to find one.
  2. Second-to-die: This type of policy—which is also called survivorship life—pays a death benefit after both policy holders pass away. In general, second-to-die life insurance is used by wealthy married couples who want to make sure their heirs are taken care of and have sufficient funds to pay inheritance or estate taxes.
  3. Joint life with last survivor annuity: This type of policy—also called a joint and survivor annuity—has a payout that’s structured in the form of an income for life for the last survivor after the death of the other. Investopedia notes that it provides an income that can’t be outlived—plus, it can be used as a way to leave an income to a beneficiary or a charitable cause.

Pros and Cons

There’s a lot to be said for a joint life insurance policy, since it provides a vehicle for couples to designate exactly who will receive what type of payout after their death. However, there are some downsides. If both partners die at once, the payout is typically lower than it would be for two separate policies. In addition, if you get a divorce, you can’t recoup any of the money that you’ve paid into the policy.

Get expert help

Before deciding what type of life insurance policy to buy, it’s wise to get unbiased advice from an independent life insurance broker like Liberty Financial Group. Our life insurance experts will review your situation and make recommendations based on your needs. Why wait? Contact us today!