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Joint Life Insurance Options

Friday, 19 November 2021

Life insurance is a crucial piece to any solid financial plan, yet choosing the right policy is a very personal decision that should uniquely reflect your circumstances and needs. The amount of coverage, duration of the policy, and type of policy widely depends on your life stage, relationship and family situation, and financial obligations. Joint life insurance is just one of the many choices that might suit your situation – and it comes at a discounted price! In this blog, we will break down what joint life insurance is, and the pros and cons to purchasing one.

Why Do You Need Life Insurance?

We get it, talking about death certainly isn’t a comfortable topic for many of us, but think of it this way: discussing and preparing for how your death impacts others shows how much you care. Life insurance protects your family’s financial future at the time of your passing. It can be used to pay off debts (e.g. mortgage, line of credit, credit card), replace your income so your family can maintain their lifestyle, leave an inheritance to your beneficiaries, and cover funeral costs and estate taxes. What’s more, life insurance provides peace of mind to you and your family by relieving financial pressures associated with death. A BIG broker would be happy to help you find the best life insurance solution for you and your family.

What is a Joint Life Insurance Policy?

For those who are in a committed, long-term relationship (business partners, common-law partners, or legal spouses), a joint life insurance policy might be the perfect solution at a reduced cost. There are two ways you might go about this.

Combined Life Insurance

A combined life insurance policy will combine two or more individual policies and provide a discounted rate with lower admin fees.

Joint Life Insurance

A joint life insurance policy is a single policy designed to cover both you and your partner in the form of a first-to-die or last-to-die policy. Insurance carriers use unique actuarial formulas to determine your joint mortality rate and thus, your premium. Normally a joint life policy provides one payout. A double payout would only be given if both partners die simultaneously or within up to 90 days of each other, subject to your individual policy wording.

Joint First-to-Die Life Insurance

A first-to-die joint life insurance policy delivers a single payout when the first spouse or partner passes away. The financial coverage can be used to replace income, pay off outstanding debts, and cover funeral costs and final expenses. This type of policy is more advisable when there’s a wider income gap between partners or financial obligations, which could leave a bigger financial burden when the first spouse dies.

The surviving partner may be able to convert the policy into a single life insurance policy without having to undergo the medical underwriting process. Only certain carriers allow this, so as always, we recommend confirming with your BIG broker to confirm.

Joint Second-to-Die Life Insurance

A second-to-die joint life insurance policy (also known as last-to-die) defers the payout until the second partner passes away. This option is ideal for couples who do not have major financial obligations or would suffer from debilitating income loss. At the time of the second partner’s death, the last-to-die insurance payout can be used to cover executor fees, funeral expenses, estate taxes, and even provide tax-free inheritance to beneficiaries.  

The Pros of Joint Life Insurance

There are several advantages of a joint life option.

  • The discounted rates could save you up to 30% on a policy.
  • With a first-to-die policy, you may be able to convert the policy into a permanent insurance plan without a medical exam after the first spouse passes away.
  • It gives both partners the same coverage amount, regardless of who dies first.
  • With it being one policy, you’ll deal with less paperwork and only have one payment.

The Downsides to Joint Life Insurance

There are downsides to having a joint life insurance policy, so as you consider your decision, keep these things in mind.

  • If there is a separation or divorce, the policy cannot be divided; you will both have to purchase new, single life insurance plans. This could result in a drastically higher premium not only because you lose the discounted rate, but because you would be applying later in life with greater health risks.
  • It’s more difficult to change the beneficiary.
  • A joint policy has fewer customizable options than an individual policy.

 

At Billyard Insurance Group, we realize it’s never a light decision when choosing the best protection for your family – our brokers can help evaluate your situation and advise you of the best options available from our trusted carriers. If you’re interested in getting a quote, or learning more about life insurance and living benefits, contact us today!