Life insurance becomes necessary once you are married and ready to have children. While most people buy an individual life insurance policy, which only pays a death benefit if the policyholder dies, a couple has another option: Instead of buying separate individual policies, joint life insurance might be an excellent option for you.
What is Joint Life Insurance?
Joint life insurance is a type of policy that provides coverage for two people under a single policy. The policy provides financial protection for surviving policyholders if one of them passes away. Those who want to ensure that their loved ones are financially protected in case of an unexpected death must buy joint life insurance.
How do Joint Life insurance Policies Work?
Joint life insurance policies can be set up as either first-to-die or second-to-die policies, and how they work can differ.
First-to-die life insurance policies
This coverage pays out the death benefit to the surviving policyholder after the death of the first insured person. For instance, if a married couple sets up a first-to-die policy after buying a joint life insurance policy. Once the first policyholder passes away, the surviving spouse will receive the death benefit payout, and the insurer will cancel the policy.
Second-to-die life insurance policies
This policy is often used for estate planning purposes because it covers any estate taxes. In addition, the coverage pays out the death benefit to the surviving policyholder after the death of the second insured person.
However, the premium is generally less expensive than purchasing two separate life insurance policies, making it an affordable option for many couples or business partners.
Who should get Joint Life Insurance?
Joint life insurance might be right for you, depending on your specific circumstances, financial needs, and goals. For example, couples who have shared financial obligations, such as a mortgage or children, may find joint life insurance helpful to ensure that the surviving partner will be able to meet these obligations if one of them were to pass away. Business partners with a financial stake in a business may also find joint life insurance useful because it provides the necessary funds to buy out a deceased partner’s share of the business.
