If you’re shopping around for term life insurance, you may have come across a joint insurance plan – also sometimes referred to as a “last survivor” or “survivorship” policy. But How Does a Joint Term Life Insurance Plan Work? What are the benefits of such an agreement, and who should consider purchasing one?
In this article, we’ll answer all of your questions about joint-term life insurance plans and help you decide if this policy is the right fit for you.
A joint-term life insurance plan is designed to cover two people under a single policy. This type of plan is often used by married couples or partners who want to provide financial protection for each other and their families in the event that they both die.
When one policyholder passes away, the other will still maintain coverage under the same policy until its expiration date. The premiums for a joint life insurance policy are typically lower than those for two separate policies since they cover two people at once.
1-What Is a Joint Term Life Insurance Plan?
A joint-term life insurance plan is a type of life insurance policy that covers two people—typically married couples or partners—under one policy. This type of policy offers a shared coverage amount that is paid out upon the death of either one of the two insured individuals, up to the maximum limit specified in the contract.
Unlike an individual life insurance policy, joint-term plans do not require individual medical exams for each applicant. Additionally, they provide a more cost-effective solution than two separate individual policies would. Instead of paying premiums for each person’s individual coverage, the couple pays only one premium for them both.
Joint life insurance policies also have flexible options to choose from when it comes to deciding the coverage amount, length of term, and payment options—allowing you to tailor your needs for your particular circumstances.
Overall, joint-term plans can provide peace of mind in knowing that your partner or spouse will be financially taken care of in the event of your death.
2-How Joint Term Plans Work: Covering Multiple Lives Under a Single Policy
Joint-term life insurance plans are policies that cover two people under one policy. The primary purpose of this type of policy is to provide financial protection for both people should one of them die.
When applying for a joint-term plan, you’ll have the option to decide if you want to purchase a level-term or decreasing-term policy. Both options will provide coverage for the two insureds and death benefit payouts if either of them dies during the term period.
A level-term plan offers a fixed death benefit amount throughout the duration of the term and usually offers an affordable premium rate when compared to two separate policies. On the other hand, decreasing-term plans offer coverage that decreases over time but has lower premium rates that make it ideal for those on a budget.
No matter which type of joint term plan you choose, it’s important to make sure that both individuals are adequately covered and that their needs won’t change over time. Doing so will ensure you have peace of mind knowing you’ve made a smart decision for yourself and your loved one.
3-The Benefits of a Joint-Term Life Insurance Plan
A joint-term life insurance plan offers some great advantages. For starters, you only need one policy for two people. The rates are also lower than if you had two of the same policies. This can save you a significant amount of money as you’ll be able to get better coverage for a much lower premium.
Joint-term life plans let couples keep the process simple by dealing with one provider, making it ideal if one partner is usually unavailable due to work or other commitments. It also means that you don’t have to worry about who will handle the paperwork when the time comes to make a claim.
On top of that, joint policies often offer a so-called “survivor benefit,” which provides death benefits to both partners after just one partner has passed away and the policy has been terminated. This means that even after one partner dies, the surviving spouse is still covered–which makes a joint policy ideal for couples who want to ensure their family’s financial security in case something were to happen.
4-Who Should Consider a Joint Term Plan?
If you already have an individual life insurance policy and are married or in a long-term relationship, you might be wondering what the appeal is of a joint-term life insurance plan. After all, you could just double up on individual plans.
A joint term plan doesn’t just cover both spouses, however—it’s actually more affordable than two separate policies, making it an attractive option for couples looking to save money and still get the protection they need. Plus, it only takes one application process to get coverage for both people, which is another bonus if you don’t have a lot of time.
In addition to saving money, there are some other reasons why a joint plan may be right for you:
- You and your partner want the same level of coverage
- You have a need for long-term coverage (10 years or longer)
- You want the same beneficiaries listed on both policies
- Your respective health statuses may not qualify each of you for individual policies with the same death benefit amount
5-How to Choose the Right Joint Term Plan
When it comes to selecting your joint-term life insurance plan, you want to make sure you weigh all of the options. Joint-term plans are typically flexible and customizable—so how do you choose the right one?
Here are a few things to help guide your decision:
Coverage amount
The most important aspect of a joint-term policy is the coverage amount. Be sure to consider all your needs before selecting an amount, such as any outstanding debts or future expenses for your family. Make sure your chosen policy provides adequate coverage for the situation.
Length of term
The length of terms varies from 10 years up to 30 years, so consider what fits best for your situation. Longer terms generally come with higher premiums but provide more protection over time. Depending on age, health, and other factors, some couples may opt for two different plans—one short-term and one long-term—to be covered in every eventuality.
Cost
Oftentimes, joint policies are less expensive than buying two single policies separately. As mentioned, longer terms generally cost more, but factor in the savings of going with a joint policy versus individual policies when looking at costs.
Remember that when it comes to choosing the right joint-term life insurance plan for you and your partner, always make sure that your desires and lifestyle needs are taken into account while considering cost and coverage amounts. A joint policy’s ability to protect both spouses can be a great way to ensure peace of mind if tragedy strikes down the road.
6-FAQs About Joint Term Life Insurance Plans
With a joint-term life insurance plan, you and your partner can be covered for the same amount of coverage. But, like any other type of insurance, you may have questions about joint-term life insurance. Here are some of the frequently asked questions about joint-term life insurance to help you decide if this type of policy is right for you.
Is the premium the same for a joint policy as for two single policies?
Yes, usually the combined premium for a joint policy is less than two single policies, as it offers a lower rate since your risk pool is greater. However, this isn’t always the case and premiums can vary depending on your age and health factors.
How does beneficiary designation work?
Beneficiaries are typically designated on each policyholder’s application form, however, in some cases, both policyholders must agree in writing to change this designation. In some cases, if both parties pass away at the same time then the primary beneficiary will receive payment.
Who pays for taxes on a joint policy?
The proceeds from a joint-term life policy are usually not taxable; however, taxes may apply if you borrow against or cash out the value of your policy before it matures or is cashed out. In that case, taxes would typically be paid by whoever transferred ownership of the policy to another party at that time.
Understanding how joint-term life insurance works can help you make an informed decision about your coverage needs and choose the plan that best meets your needs.
Conclusion
In summary, joint-term life insurance plans provide a simpler, more cost-effective way to protect more than one life under one policy. The premiums are often lower than individual policies, so couples looking for life insurance coverage should investigate joint-term life insurance plans.
Make sure to discuss your financial goals and objectives with both parties before jumping in, as well as the potential implications involved in choosing a joint policy. Ultimately, a joint-term plan allows both parties to maximize their life insurance coverage while providing financial assurance for both parties in the event of an unexpected passing.