Life Insurance: Husbands And Wives, Apply Together?

Life insurance is an important consideration for married couples to ensure the financial security of their families. There are several options available, including joint life insurance policies and separate life insurance policies. Joint life insurance policies cover both spouses under a single policy, while separate life insurance policies allow each spouse to have their own individual policy. Both options have their own pros and cons, and the best choice depends on the couple's unique circumstances and needs. Joint policies may lower overall costs and simplify management, but they offer less flexibility and can be complicated if the marriage ends. Separate policies, on the other hand, provide greater customization and flexibility but require managing multiple policies and are typically more expensive. When deciding on life insurance, couples should carefully consider their financial situation, coverage needs, and personal preferences to choose the option that best suits their requirements.

Joint vs. separate life insurance

Married couples have the option of obtaining either separate life insurance policies or a joint life insurance policy. A joint life insurance policy covers both spouses, while a separate life insurance policy will only cover one individual. Both options have their pros and cons, and the best choice for you will depend on your unique circumstances and coverage needs.

Joint Life Insurance Policies

A joint life insurance policy is a single policy that covers both spouses. It is generally used by married couples who want to cover both partners under one policy and is typically less expensive than two separate policies.

There are two types of joint life insurance policies: first-to-die and second-to-die (also known as survivorship policies). In a first-to-die policy, the surviving spouse will receive the death benefit payout after the first spouse dies. In a second-to-die policy, the beneficiaries will receive the death benefit once both spouses have passed away.

Pros of Joint Life Insurance Policies

• May lower overall life insurance costs
• Simplifies management with one policy
• Can be useful for estate planning and minimizing taxes
• Provides financial security to the surviving spouse or beneficiary

Cons of Joint Life Insurance Policies

• Payout structure might not fit all needs (e.g., second-to-die only pays out after both spouses pass away)
• If the marriage ends, the policy may become complicated to manage
• Limited flexibility compared to individual policies
• Coverage may be less than individual policies for the same premium
• Second spouse no longer covered in a first-to-die scenario
• If one partner has health issues, the cost for the healthier spouse may be higher than individual coverage

Separate Life Insurance Policies

A separate life insurance policy will cover only one individual and will pay out a death benefit if the individual passes away while the policy is in force. There are two main types of individual life insurance policies: term and permanent. Term policies cover you for a set period, usually 10 to 30 years, while permanent policies are designed to last your entire life.

Pros of Separate Life Insurance Policies

• Greater flexibility in choosing different types of policies
• Can be tailored to individual needs and financial goals
• Each spouse has their own coverage, unaffected by changes in marital status
• Allows for higher coverage amounts per individual

Cons of Separate Life Insurance Policies

• Typically more expensive than a joint policy
• Requires managing multiple policies
• No potential cost savings from a combined policy
• Individual underwriting might be more stringent and vary per spouse

The best life insurance policy for you and your spouse will depend on your financial situation, coverage needs, and personal preferences. If you value flexibility and individualized coverage, separate policies might be preferable. If you prioritize simplicity and potential cost savings, a joint policy could be more suitable. Consulting with a licensed insurance agent can help you navigate these options and choose the best coverage for your circumstances.

First-to-die vs. second-to-die policies

First-to-die and second-to-die policies are types of joint life insurance policies. They are also referred to as dual life insurance policies. These policies cover two people, usually a married couple, but they can also be used by domestic partners or business co-owners.

First-to-die policies

First-to-die policies pay out a death benefit to the surviving partner when the other person dies. This type of policy is suitable for couples who want to provide financial protection for each other. However, if the surviving spouse still needs life insurance coverage after their partner's death, they would have to apply for a new policy, which could be difficult if they are older or have health issues.

Second-to-die policies

Also known as survivorship policies, second-to-die policies only pay out the death benefit after both spouses have passed away. These policies are often used for estate planning purposes, as they can help cover probate expenses, estate taxes, and other estate-settlement costs. Second-to-die policies are typically cheaper than individual life insurance policies because the premiums are based on the joint life expectancy of the insured couple. Additionally, the qualifications for survivorship policies may be less stringent, making it easier for individuals with health issues to obtain coverage. However, a second-to-die policy may not be suitable if the surviving spouse needs the insurance benefit to cover their expenses or maintain their standard of living.

Pros and cons of joint life insurance

Joint life insurance is a type of policy that covers two people, usually spouses or partners, under one policy for one premium. It is also known as a dual life insurance policy. The main difference between a joint and an individual policy is that a joint policy will pay out once, after the death of the first policyholder.

Pros

• Joint life insurance can be more affordable than two individual policies. A joint policy can cost up to 40% less than two single policies.
• With first-to-die policies, the pay-out goes straight to the surviving partner, which can make the payment process quicker.
• You don’t need to be married to take out joint cover.

Cons

• Your beneficiaries will only receive one pay-out.
• If a couple with joint cover splits up, the policy can’t usually be divided.
• There is less flexibility with joint policies compared to individual policies.
• Coverage may be less than individual policies for the same premium.
• If one partner has health issues, the cost for the healthier spouse may be higher than individual coverage.

Pros and cons of separate life insurance

There are several factors to consider when deciding between joint or separate life insurance policies as a couple. Both options have their own advantages and disadvantages, and the best choice depends on individual circumstances and financial goals. Here are some pros and cons of separate life insurance policies for couples:

Pros of Separate Life Insurance:

• Tailored coverage: Separate policies allow each spouse to have coverage tailored to their specific needs. This is especially beneficial if one spouse has higher earnings, or if there are unequal health statuses or ages between the partners. With separate policies, each individual can adjust their coverage amount and type to suit their unique circumstances.
• Continued coverage: With a separate policy, if one spouse passes away, the surviving partner continues to have their own life insurance coverage. This provides peace of mind and ensures that the surviving spouse does not need to purchase a new policy at an older age, which could result in higher premiums.
• Simpler in case of relationship changes: Separate policies are more straightforward in the event of a relationship change, such as divorce. With joint policies, managing the policy can become complicated, and separating it might require additional administrative work or health underwriting.
• Spousal riders: If desired, spouses can still add coverage for their partner through spousal riders, which are add-ons to certain existing life insurance policies. This allows for separate policies while maintaining a level of coverage for both individuals.

Cons of Separate Life Insurance:

• Cost: Separate policies can be more expensive than a joint policy, as the total payout for two individual policies is typically higher than that of a single joint policy.
• Administrative tasks: Managing two separate policies can result in more administrative work, as each policy has its own premiums, policy details, and paperwork.
• Limited estate planning benefits: Joint life insurance policies are often used for estate planning, as the death benefit can be used to pay off estate taxes and protect the estate's value for heirs. Separate policies may not offer the same level of estate planning benefits.
• Reduced cost-effectiveness: Separate policies may be less cost-effective for young, dual-income families, where both spouses earn similar amounts. In such cases, a joint first-to-die policy may provide sufficient coverage for the surviving spouse at a lower cost.

It is important to carefully consider the pros and cons of separate life insurance policies and weigh them against individual circumstances and financial goals. Consulting with a financial advisor can provide valuable insights and guidance in making an informed decision.

How to save money on life insurance

While it is important to select a life insurance policy that meets your needs, there are ways to save money when buying life insurance. Here are some strategies to help you pay less for life insurance:

• Buy when you're young: Life insurance rates are largely determined by your age when you buy the policy. The younger you are, the lower the premiums. For instance, the average annual premium for a $500,000 20-year term policy for a nonsmoking man in excellent health is $406 if bought at age 30, $622 if bought at age 40, and $1,461 if bought at age 50.
• Consider term insurance: Term life insurance premiums are often significantly less than permanent life insurance premiums for the same death benefit. Term insurance is ideal for those who only need coverage for a limited time, such as until their children are grown or their mortgage is paid off.
• Calculate your coverage needs: Choose a death benefit amount that allows your beneficiaries to meet their financial obligations. You may not need a high level of coverage if you don't have a family or own a home. On the other hand, you may want to add more coverage if you have children whose weddings or college costs you want to cover.
• Buy only the coverage you need: While life insurance is important, you can save money by only purchasing the amount of coverage you truly need. This will depend on factors such as your age, income, mortgage, debts, and anticipated funeral expenses.
• Look for policy discounts: Ask your insurance agent about any discounts you may qualify for, such as bundling your life insurance with other types of insurance or belonging to a specific group or organization. Additionally, many companies offer deep discounts for paying your premium in full once a year.
• Maintain good health: Not smoking, maintaining a healthy weight, and improving your health through good nutrition, exercise, and sleep habits can help keep your premiums low.
• Shop around and compare: It is always wise to get quotes from several insurers to find the best balance of price and coverage. You can contact insurance companies directly, work with an insurance broker, or use online quote services.
• Ask about discounts and rewards programs: Some insurers offer discounts for automatic payments or participation in healthy lifestyle programs.
• Consider group insurance: Your employer may offer an insurance program that is less expensive than individual life insurance.
• Focus on financially sound companies: Opt for companies with high ratings from independent rating agencies. A low premium from an unstable company is not worth the risk.
• Be aware of premium discounts and bands: Most companies offer rate discounts for specified insurance amounts. Additionally, some companies have premium bands, where higher face amounts have lower premium rates.
• Look into "fractional premiums": Find out if your insurance company charges high fees for paying premiums frequently (e.g., quarterly or monthly). If so, try budgeting to pay your premium only once or twice a year.
• Ask for a rate re-evaluation if your health improves: If your health has improved, you may be able to get a lower rate by submitting new medical records to your insurer.

Frequently asked questions