What is Joint Life Insurance and Why Do Couples Need It?

Ratehub.ca
by Ratehub.ca May 7, 2018 / No Comments

When you think about life insurance, you probably think of coverage on a single life. That’s the most common form. If you and your spouse both get single life insurance from the same company at the same time, you might get a discount. Joint life insurance covers more than one person — generally two. There are two forms:

  • Joint first-to-die
  • Joint last-to-die

The names aren’t pleasant but the coverage can be. With joint life insurane, the mortality rates for each person get combined using actuarial formulas. The result is an equivalent single age for a male non-smoker with similar mortality characteristics. Don’t worry about the details — you’ll see examples below.

Not a product

You can’t buy something called “joint life insurance.” You get conventional life insurance:

Instead of selecting single life mortality rates, you chose joint life. Let’s look at the uses.

Joint first-to-die 

The death benefit is paid at the time of the first death. This is useful for a shared obligation like repaying a mortgage. The alternative is getting two single life policies, which usually costs more. Here are examples for healthy non-smokers of various ages:

Male age Female age Equivalent age
30 30 36
40 40 46
50 50 56
60 60 66
70 70 76

(Results may differ by company)

Since the probability of either person dying is higher than only one dying, the equivalent age is higher than the oldest age.

Joint last-to-die

The death benefit is paid at the time of the last death. Assets such as RRSPs and a cottage can transfer to the surviving spouse tax-free. This defers taxes until the second death. Joint last-to-die is perfect because the death benefit is paid when the bills are due.

Here are examples for healthy non-smokers of various ages:

Male age Female age Equivalent age
30 30 21
40 40 31
50 50 41
60 60 51
70 70 61

(Results may differ by company)

Since the death of both lives is further away than the death of either life, the equivalent age is lower than the youngest age.

Caveats

Joint life insurance has less flexibility than separate single life contracts. That’s a tradeoff for the savings you get.

With a joint policy, each life has the same amount of coverage. If that’s not ideal, single life contracts may be better. Another solution is to get a joint policy that satisfies the overlapping requirements and adding riders for the lives requiring more coverage.

Get a custom life insurance quote now.

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