Despite the increasing variety of life insurance plans available on the market today, it can be a hard sell for many families who opt out of purchasing a plan.
In fact, 37 million families are without life insurance in the United States.
If you and your spouse are among those uninsured, it may be time to consider joint term life insurance.
What Is Joint Term Life Insurance?
Joint term life insurance really has two components: It is a shared, or joint, policy, guaranteed over a specific set of years, or term.
A joint policy can cover any two people—even business partners. Generally, these policies are popular with married couples interested in the benefits a joint plan can offer.
The Benefits of Joint Insurance
The number one reason to purchase a joint term life insurance plan is the cost.
It is almost always cheaper to insure both spouses under one policy than it is to shop for two separate plans.
Joint plans are also a good choice if one spouse has serious health problems that make it difficult to afford life insurance.
Two Types of Joint Term Life Insurance
You have two options when shopping for a joint policy: First to die and second to die, or survivorship. Let’s examine each one.
First to Die
A first to die policy will pay out after a spouse dies. These policies are usually purchased to provide the surviving spouse with enough funds to pay off any mutual debt the couple shares.
It’s important to note that after a first to die policy is paid out, the surviving spouse is no longer covered. He or she would have to purchase a new policy, possibly at a higher cost.
When to buy: Young couples may be good candidates for a first to die policy. In the event of an unexpected death, the surviving spouse and children benefit from a higher payout that helps maintain their lifestyle.
That’s good protection against accidents, the fourth-leading cause of death in the U.S.
Second to Die, or Survivorship
A second to die policy pays out to beneficiaries only after both spouses die.
This form of joint term life insurance is intended to protect children from estate or inheritance taxes after the death of their parents.
Estate taxes can be pricey. Together with gift taxes, they cost taxpayers $21 billion in 2016.
When to buy: Wealthy couples with children and large estates are a good fit for survivorship plans.
There are, of course, some negative aspects to these plans.
If both spouses die at the same time, as in a car accident, the beneficiaries still only receive one payment.
A joint policy is only good as long as the couple is together, so in the event of a divorce, it may dissolve.
Some policies include clauses the protect the plan in this situation, so check with your agent before buying.
Need more information about purchasing a plan? At Real Life Alliance, we help you make informed choices about your life insurance coverage.