Joint Life Insurance: What Is It? How Does It Work?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is Joint Universal Life Insurance?

Joint universal life insurance is a type of life insurance policy designed to cover two individuals, typically a married couple, under a single policy. It provides a death benefit paid out upon the death of either insured individual. It also has a cash value component that grows over time, providing potential financial benefits during the policy’s lifetime.

How Does a Joint Life Insurance Policy Work?

A joint life insurance policy combines two individuals’ coverage into a single policy. The policy pays out a death benefit upon the death of either insured individual, and the premiums are based on the combined risk of both individuals. This means that the premiums for a joint life insurance policy may be lower than two separate individual policies, making it an attractive option for couples.

Can A Life Insurance Policy Have Multiple Owners

Can You Get Joint Life Insurance?

Yes, joint life insurance is available for couples who want to have a single policy that covers both of them. Insurance companies typically offer it, which can be purchased by legally married couples or in a domestic partnership. In addition, joint life insurance can be a good option for couples who want to ensure their loved ones are financially protected during their death.

Joint Term Life Insurance vs. Joint Universal Life Insurance

When it comes to joint life insurance, there are two main types: joint term life insurance and joint universal life insurance. Joint term life insurance covers a specific term, usually 10, 15, 20, or 30 years, and pays out a death benefit if the either insured individual dies during the term. On the other hand, joint universal life insurance provides coverage for the entire lifetime of insured individuals, and it also has a cash value component that can grow over time.

Understanding Joint Universal Life Insurance

Joint universal life insurance is a flexible type of policy that combines the features of traditional universal life insurance with the added benefit of joint coverage. It provides a death benefit that is paid out upon the death of an insured individual, and it also has a cash value component that grows over time, providing potential financial benefits during the lifetime of the policy. The cash value component can be invested in various options, such as stocks, bonds, or money market funds, potentially allowing policyholders to grow their policy’s value over time.

Benefits of Joint Universal Life Insurance

There are several benefits to having a joint universal life insurance policy for couples. Some of the key benefits include:

Death benefit: Joint universal life insurance provides a death benefit paid out to the surviving spouse or beneficiary upon the death of either insured individual. This can help ensure that your loved ones are financially protected and can maintain their standard of living in the event of your passing.

Cash value component: Joint universal life insurance also has a cash value component that grows over time. This cash value can be accessed during the lifetime of the policyholders. It can be used for various purposes, such as supplementing retirement income, paying for education expenses, or covering unexpected financial needs.

Flexibility: Joint universal life insurance offers flexibility regarding premium payments, death benefit amounts, and investment options. Policyholders can adjust their premiums and death benefit amounts to suit their changing financial needs. They can also choose how to invest the cash value component based on their risk tolerance and financial goals.

Tax advantages: Joint universal life insurance may offer tax advantages, such as tax-deferred growth of the cash value component and tax-free death benefit proceeds. This can make it a valuable tool for estate planning and wealth transfer strategies for couples.

What is the difference between joint life and survivorship life?

Survivorship policies, also known as second-to-die life insurance, are joint insurance coverage that pays out a benefit after the second person’s death.

Joint Life Insurance Policies vs. Individual Life Insurance Policies

Individual life insurance policies cover a single individual, whereas joint life insurance protects two people.

This policy will only pay a death benefit if one insured dies. As a result, most of those who acquire this insurance are married or domestic partners, even though they do not have to be.

Joint Tenants Life Insurance

What are the two main types of joint life coverage?

Joint life insurance covers two individuals who will likely die at two different times, paying a single life insurance benefit. Insurance companies offer two kinds of joint coverage to accommodate various scenarios. 

First-to-die life insurance

First-to-die life insurance pays the death benefit after the first person dies. Once the proceeds are paid out, the second person has no remaining coverage. To continue having life insurance protection, they must apply for new coverage. As a result, first-to-die coverage is less common today.

Second-to-die life insurance

Second-to-die life insurance coverage, sometimes called survivorship life insurance, pays out the death benefit proceeds only after the second (surviving) person passes away.

Second-to-die coverage for estate planning is typically purchased with a permanent policy such as a whole life or universal life insurance policy. Term insurance is not used because if the policy term ends before the second covered person dies, no assets will be passed to beneficiaries.

Joint Life Insurance: Pros and Cons

Pros

  • It may be a more affordable alternative for young, two-income families.
  • The surviving spouse has more control over estate planning.

Cons

  • Additional insurance may be required in the future, which is more expensive.
  • It might be more expensive than individual insurance if one partner has a pre-existing condition.
  • A payout might take a long time to arrive.
  • When couples divorce, it isn’t easy to divide their insurance policies.

Considerations for Couples

While joint universal life insurance can offer significant benefits for couples, it’s essential to carefully consider certain factors before deciding. Here are some considerations to keep in mind:

Premiums: Joint universal life insurance premiums may be higher than other life insurance policies, as they provide coverage for two individuals under a single policy. Couples should carefully assess their budget and financial situation to ensure they can comfortably afford the premiums throughout the policy’s life.

Health and insurability: Both individuals’ health and insurability can affect the premiums and eligibility for joint universal life insurance. If one of the insured individuals has a health condition or other risk factors, it could impact the premiums or even the ability to obtain coverage. Couples should thoroughly assess their health and insurance before applying for a joint universal life insurance policy.

Future changes: Couples should also consider potential changes in their circumstances, such as divorce or the death of one insured individual. Joint universal life insurance policies are typically designed to cover both individuals, and changes in marital status, or the death of one individual can affect the coverage and policy benefits. Therefore, reviewing and updating the policy as needed is essential to ensure it aligns with changing circumstances.

Next Steps

Joint universal life insurance can be a valuable financial tool for couples who want to secure their financial future and protect their loved ones. It offers the benefits of a death benefit and a cash value component, along with flexibility and potential tax advantages. However, it’s essential to carefully consider your budget, health, and future changes when deciding if a joint universal life insurance policy is the right fit for you and your partner. Consulting with a qualified insurance professional can help you navigate the complexities of joint universal life insurance and make an informed decision based on your unique needs and circumstances. With proper planning and consideration, joint universal life insurance can provide valuable protection and financial benefits for couples, helping them achieve their financial goals and secure their legacy for future generations.

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Frequently Asked Questions

Can a life insurance policy have two owners?

Yes, a life insurance policy can have two owners. This is known as joint ownership. Joint ownership allows two people to own the same policy, which can be beneficial in several ways. For example, joint ownership can help ensure that both parties are financially protected in case of the death of one of the policyholders.

What is joint life insurance?

A joint life insurance plan, otherwise known as survivorship coverage, offers protection for two people and will release the life insurance money upon the passing of both parties.

What is the benefit of joint life?

Get security assurance for two people with a Joint Life term insurance policy. Both insured parties pay an agreed-upon premium for a set duration, and upon the passing of one individual, the sum assured is paid out to their co-insured partner. Relish the peace of mind that comes with knowing you are both protected!

Who can take a joint life policy?

By obtaining a joint-term insurance policy, two individuals – such as a parent and child – can provide each other with financial security in the event of an untimely death. In addition, the plan’s payout will benefit the family by covering enormous costs like tuition or housing expenses. This protection allows families to focus on their future without worrying about unanticipated losses.

Is joint life cheaper than survivorship?

Survivorship life insurance, or second-to-die joint policies as they are called, only provides a death benefit when both policyholders have passed away. However, this coverage is usually more cost-efficient compared to two permanent plans.

Who benefits from a joint life insurance policy?

If two parties opt for joint coverage, the payout will be identical regardless of who passes away first. With this plan, both individuals are insured for an equivalent amount.

Why do the partners take a joint life policy?

Partners take out a Joint Life Policy (JLP) to protect against the possible financial burden of paying large sums in case of one partner’s death. By purchasing this policy, partners can provide both secure peace of mind and ensure that their business is safeguarded from any undue expenses related to such an unfortunate occurrence.

*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost to you if you purchase a policy. It helps us keep the lights on!

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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