How does Joint Life Insurance Work?

Joint life insurance is a term or whole life insurance plan that covers two or more people under a single policy. The terms of the policies can be customized to the needs of the customer and may provide the simplest way to cover married couples or business partners.

How does Joint Life Insurance Work?

Joint life insurance allows two or more people to get a single insurance plan. That means they pay one premium for both people and benefits are paid out either in the event of the first orr the second death, according to the terms of the policy. Also, depending on the terms of the policy, joint life insurance can be term or whole life, but because it is only one plan, it only pays out on one death. It’s up to the couple to choose whether they want benefits paid out in the event of the first or second death.

Partners in Life and Death

Joint term life insurance can make sense for married couples who are also business partners. By purchasing a single plan for the pair, the couple can save a great deal of money. They’re both covered in the event of the death of either of them, but they only have to pay for a single plan. It’s a way of hedging one’s bets, as it is almost impossible to predict who will die first. The policy’s coverage ends when it pays out benefits, but the survivor can always pick up a second plan at that time.

Second-Death or Survivalist Benefits

Another variation of joint life insurance is known as second-death or survivalist benefits. This policy pays out benefits only after the last policy member passes. The benefits go to the designated beneficiaries, often a couple’s children, and can cover the costs of a funeral or burial or may be used to set up a trust. A survivalist plan is one of the least expensive life insurance options because it only pays out once for two people. It is also one off the least flexible insurance plans; once a policy is in place, it can be almost impossible to change its terms.

The Drawbacks

Joint life insurance may be a great option for couples that own a business together or have a single income source. However, for dual income households, joint life insurance may not be the best choice as the plan is incredibly inflexible and does not reflect the differences in income. For business partners, the plan can help stave off debts when one partner dies, but as the policies are so inflexible, if the partners decide to go their separate ways, they will lose out on any money paid into their joint life insurance plan.

Death is an unfortunate inevitability, but with proper planning, individuals can still provide for those they leave behind. Joint life insurance can be a financially prudent way for couples to protect their children or for business partners to insure the stability of their business, even after they’re gone.

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