JOINT LIFE INSURANCE
Suppose two people, usually a couple, want to get insurance for themselves. In that case, they have an option of buying one insurance policy that covers both of them. This is known as mutual life insurance. It prevents them from the hustle of buying individual insurance policies and can be less expensive. The policy is limited to married couples; instead, two unmarried partners can also buy this policy. Most of the time, parents pursue joint life insurance to secure the financial future of the significant other and the children.
Joint life insurance can be bought for two people at a price same for an individual policy. Although the policy is for two people, there is only one death benefit provided. Now, whose death will lead to the issuance of death benefit is dependent on its two types:
First to die life insurance
The first to die life insurance means that if any of the two insurers dies, the death benefit is paid out. The surviving partner is named the beneficiary who receives the death benefit. However, once paid, the policy will not cover the surviving partner. If he or she wishes to continue its coverage, a new policy is to be purchased. First to die life insurance is picked if the aim is to use the policy as an income replacement after the death of any partner. Couples who are young and earning equal money prefer to choose this option.
Second to die life insurance
The second to die life insurance means that the death benefit is paid out only after both the insurer dies. If one of the partners dies first, it doesn’t treat the surviving partner as the beneficiary. Instead the couple needs to declare other people the beneficiaries. Any person, organization, or business associate can be declared as the beneficiary, depending on why the insurance was purchased in the first place. Second to die life insurance is usually preferred when the aim is to equal any outstanding balance or leave money for the children’s future security.