Joint Life (First to Die); Survivorship (Second to Die):

Two (or more) for little more than the price of one.

Have you ever wished you and your spouse could be on the same life insurance policy without it being a term rider or doubling the premium?

Actually, you can be, although not all companies offer it, and you will need to ask questions and read the fine print very closely. request rates >>

People often purchase a fairly large life insurance policy on the primary wage earner of the family and then purchase a 20 year term rider on the spouse. The rider can be converted to individual whole life during the term, usually without medical underwriting. It price of the whole life will then depend on the age of the insured at the time of the conversion.

But what if both spouses have careers and are equally responsible for things like child rearing and paying the mortgage? Usually, people simply purchase an individual whole life, or perhaps a Term life, on each spouse. For some, there may be a better way.

Understanding two unusual options

A type of policy that covers spouses, or even two or more business partners is Joint Life, also called First to Die. The policy does exactly what it sounds like—pays when the first insured person dies. The underlying concept is that when the first person dies, the joint policy will provide the living person with enough money to pay the mortgage, provide for children, or pay off a business loan. Once that is done, the large face value will no longer be needed.

The second option is called Survivorship, Survivor or Second to Die. 2nd to die does not pay until the last insured dies, whether it be a spouse in a marriage or the last partner in a business. This approach is most logical when a couple wants to leave a sizable legacy to someone or when they don't need the money as long as one of them is living, but will need to leave a way for the heirs to pay estate taxes, pay off debt, and so forth.

Advantages

• Either policy will have a lower premium than you would pay if you insured the partners separately.
  
  
• The joint and survivorship options usually have easier underwriting requirements, especially if one of the people is quite healthy. Thus it can be easier to get insurance on an individual who otherwise would not medically qualify.
  
  
• Either policy can be written as a Term policy or as a whole life policy. When written as whole life, it will build cash value just like any other whole life policy.
  
  
• On the whole life variation, loans are available, although all the partners must sign.

Disadvantages

• The policies are usually not very flexible after they are written. Neither the premium nor the face value can be changed with most companies.
  
  
• The younger person in the partnership pays more than he or she ordinarily would as the premium is calculated on the average of the ages of the insureds.
  
  
• Such policies can be difficult to find as companies collect more premium on individual policies.
  
  
• On the first to die variation, the survivor may need to purchase whole life for final expenses. Since there is no way to know who will die first, it is impossible to make this arrangement when the insureds are young and whole life relatively inexpensive.

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