Joint Life Insurance

By Julie Shields

Joint life insurance is coverage of two or more persons with the death benefit payable at the first death. Premiums are significantly higher than for policies that insure one person, since the probability of having to pay a death claim is higher for the insurance company.

Joint life insurance policies are most often used by spouses and business partners. It provides a type of coverage that is best suited to some kind of interdependent relationship, where if one of the key members or one of the partners dies the other(s) would be left out in the cold or up the river without a paddle sans the coverage.

There is a variation on this theme, however: there are joint life insurance policies that pay out on the second death, not the first. This type of joint life insurance policy might be used where two people who have high risk occupations have a similar interest in protecting the same people or assets. For instance, second-death life insurance policies can be used as trusts written in the name of a man and woman's children. When the second parent dies the children will receive the money without having to go through probate court.

Many may wonder if it is better to use a joint life insurance policy with its higher premiums, or just buy two individual life insurance policies each for the same amount of coverage. The answer depends on the circumstances.

For one thing, a single joint life insurance policy might cost more than a policy that covers only one death, but two individual policies might add up to more than that one joint premium, too. Financial planners usually recommend a joint life insurance policy in business settings, therefore, as businesses must find every means possible of saving money.

In fact, it is with regards to business considerations of one form or another that joint life insurance policies are the better option. Small businesses owned by just two partners, especially family owned businesses owned by husband and wife, can greatly benefit from a joint life insurance policy designed to make sure that the business can continue if one of them dies prematurely. And as the above mentioned instance with the children's trust alludes to, joint life insurance can work great as an estate planning vehicle so that assets don't need to be liquidated should parents die prematurely.

Another "business" consideration where joint life insurance may be a great option is in mortgage protection for couples. This would be a good option where one of the spouses didn't have mortgage protection life insurance (usually in the form of "decreasing term") and there is still an outstanding mortgage balance.

However, it is better for each partner in a marriage to have their own life insurance for mortgage protection in the case of the other's death. And this is because joint life insurance is not such a good idea just for spouses.

In a marriage, there are usually two incomes, and those two incomes are usually not the same. Therefore one of the spouses would possibly benefit too much and the other possibly too little if a payout had to be made on a joint life insurance policy they held. For another thing, it's a sad but true fact that marriages don't last these days. If a marriage dissolves and both people have their own life insurance, they just take it with them; but if they have a joint policy they will probably both not want to pay the premiums anymore and the policy will lapse, leaving neither one of them covered. If they divorce while there are still minor children to take care of that could leave those children vulnerable, too.

So, joint life insurance is an excellent idea--in the right circumstances.

The author lives with her husband in Maryland, with their two dogs and cat. She put together the website http://www.affordable-life-insurance-guru.com in order to help the everyday person navigate the often confusing world of life insurance

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