What Is a Joint Life Insurance Policy and How Does It Work?

by Bestow Team | March 18, 2022

7 Minute Read

Couples can do all sorts of fun things together, like ride a tandem bicycle or wear matching pajamas. As a dynamic duo, you’ll probably share some more serious moments, as well —  like opening a joint checking account or purchasing life insurance together. 

If you’re married or in a long-term commitment, you may consider purchasing life insurance coverage for both you and your partner. If you both have coverage and one of you passes away, the other can receive a death benefit that can be used to help ease the burden of going it alone. Should you decide to go that route, you’ve got options. You can each take out an individual policy or you can look into getting a joint life insurance policy.

If we were to offer a simple, one-sentence joint life insurance definition, it would be this: a life insurance policy that covers two people.

Of course, it gets more complex than that. If you haven’t heard of joint life insurance, that’s understandable. It’s not as commonly purchased as individual policies, and not every life insurance company offers joint life insurance. 

How Do Joint Life Insurance Policies Work?

Joint life insurance can be purchased by married couples and those in domestic partnerships (and even business partners). 

Like most life insurance policies, joint life insurance can be used to provide your chosen beneficiaries with financial support should anything happen to you or your partner. Insurers who sell joint life insurance typically offer first-to-die life insurance and second-to-die life insurance, also known as a survivorship policy. 

The Types of Joint Life Insurance Available

If you decide to purchase a joint policy, you will next need to determine what type of joint life insurance is the best option for the needs of you and your loved ones. The application process for this type of life insurance is usually a bit more involved than that of single term life insurance, and both potentially covered parties will likely need to submit a medical exam when applying for a joint policy.

First-To-Die Insurance

First-to-die insurance can be sold as a permanent policy or term life insurance, though even on a permanent policy, the joint insured has a term policy. Each insured person has their own policy and can name their own beneficiary. A first-to-die policy provides a death benefit after the first person covered passes away.

Much like an individual insurance policy, first-to-die joint insurance can offer some financial protection for the surviving partner if they are named as a designated beneficiary. When one person on a first-to-die policy passes away, some insurance companies will offer the surviving insured person an option to convert their policy into an individual policy with the same death benefit and underwriting class.

First-to-die joint insurance might be a good fit for younger families, people with a mortgage or large debt, and couples with one majority income earner. 

Second-To-Die Insurance (Survivorship Policy)

A second-to-die joint life insurance policy, also known as last-to-die insurance or a survivorship policy, is typically permanent and pays out a death benefit only when both policyholders have passed away. When the first person dies, instead of receiving a payout, the other person continues to pay the premiums to keep the policy in force.

Second-to-die policies might be a good type of insurance in cases where one person is in great health but the other has health issues, as the death benefit is paid out only when the second policyholder passes away. 

Do You Have to Be Married to Have a Joint Life Insurance Policy?

In most cases, insurance companies are looking for shared assets and insurable interests, not marriage certificates. Married couples, domestic partners, and business partners are a few duos who might think about taking out a joint life insurance policy.

Get an instant quote for term life insurance, no medical exam required.

Joint Life Insurance Policy vs. Single Life Insurance Policy

When it comes to choosing between a single or joint life insurance policy (like with all financial decisions) it’s really about zeroing in on your unique needs.

One difference to consider is cost. If you are set on purchasing permanent life insurance, a joint life insurance policy can often be less expensive than purchasing two individual permanent policies, so long as both you and your partner are young and in good health. If one of you has what is considered a notable health issue, a joint policy could be costly. 

Another thing to consider is coverage. With a first-to-die joint life insurance policy, if one of you passes away, the policy could end. This can leave children or other dependents without financial protection, though there might be an option for the survivor to convert to a permanent policy. Second-to-die joint life insurance, on the other hand, provides a death benefit only when both policyholders have died.

If a married couple were to instead purchase two single life insurance policies to cover each individual and name the other spouse as beneficiary, and one were to pass away, the living spouse could receive a death benefit and still be covered by their own individual policy. 

The last thing you might want to think over is the death benefit — the amount of money a beneficiary will receive if a policyholder (or policyholders) dies. If you have a joint life insurance policy, that policy may only have one payout amount. If you instead purchase two single life insurance policies, each one can have a different death benefit, something couples who do not earn the same amount of money may want to consider. If a majority income earner dies, you will likely need income to cover their salary. If the main caretaker dies, you might need financial support for childcare, transportation, and other forms of support.

Benefits of a Joint Life Insurance Policy

Now that you have a handle on the definition of joint life insurance, let’s explore all the benefits of sharing a policy with another person. 

Here are some situations in which joint life insurance might be a good idea:

  • You want permanent life insurance but can only afford insurance premiums for one policy.
  • You are estate planning and want to leave your loved ones an inheritance.
  • Your retirement plan includes holding an insurance policy with a cash value component.
  • One spouse is having trouble qualifying for an individual policy.
  • Both of you are equal earners. 

Potential Drawbacks of a Joint Life Insurance Policy

Every type of insurance has its pros and cons, which vary depending on your family’s need. Here are a few potential joint life insurance deal breakers:

  • If one spouse has health issues, smokes, or is a bit on the older side, higher premiums can be expected.
  • Things can become complicated if the policyholders get divorced.
  • There may only be one payout for two people (whereas two individual policies = two death benefits).
  • Coverage cannot be personalized for each insured person.

Joint life insurance may be a great option for some married couples and partners. For others, it might make more sense to buy two individual life insurance policies, or even just one. It depends on you, your priorities, and your financial situation.

Finding the Right Type of Life Insurance for Your Needs

Regardless of what the internet might tell you, there is no one type of life insurance that ranks as the best. Instead of searching for the holy grail of life insurance, make a list of your family’s insurance needs, the amount of coverage you want, and then shop around for an insurance policy that works for your unique situation. 

Some insurance providers offer instant life insurance quotes that allow you to play around with different coverage terms, coverage amounts, and features. With Bestow, you can apply for term life insurance in minutes and, if approved, you could activate and have coverage by the end of the day. The whole process is online. There are no medical exams. No lengthy phone calls or waiting periods. It’s just you, your device, a few clicks, and boom — you could be covered up to $1.5 million in minutes.