Should You Say 'I Do' to Life Insurance for Married Couples?

As most life partners will attest, when you get married (which an estimated 2.6 million partners did in 2022, according to the wedding planning website The Knot), you start making decisions together that you used to do on your own. From jointly deciding on what home to buy, to sharing fiscal responsibility, to even launching a family-owned business, with just two short words — "I do" — marriage has a way of turning the "me" into "we" as quickly as vows are exchanged. While many would agree that they don't run each and every financial decision by their husband or wife (for example, close to 50% of Americans maintain separate bank accounts from their partners, including approximately 1 in 4 with joint accounts set up, a Varo Money survey showed), you become a team when you're married, sharing in the day-to-day experiences, responsibilities and purchases.

For these reasons, there's life insurance for married couples. Perhaps you've heard of joint life insurance but don't know too much about it beyond the fact that it's geared toward people who are married or are about to be. Here, we'll unpack what this kind of life insurance coverage is, how it works, who can get it and whether it makes sense for you to inquire about it with a trusted insurance company. 

What is joint life insurance?
As its title suggests, joint life insurance is a policy in which two people – in this case, a married couple – share the same policy. So instead of each partner having his or her own separate policy, which is what single life insurance or an individual policy is all about, joint life insurance combines them so both individuals have the proper coverage in place.

It's important to note that joint life insurance is exclusive to two people, even though the definition of "joint" can mean shared by two or more people. Joint life insurance typically is no more than two. Additionally, while it's generally used as life insurance for married couples, it's also leveraged in business partnerships, civil unions or domestic partnerships.

How does a joint life insurance policy work?
Joint life insurance is similar to traditional single life insurance policies, in that it can cover the kinds of expenses that occur after a loss, like funeral arrangements, a mortgage or other unpaid debts. It also comes in the form of term life insurance or permanent life insurance. But beyond that, a joint policy is its own entity that requires some elaboration.

Perhaps the most distinctive aspect of joint life insurance is the death benefit. While the policy covers two people, there is just one death benefit. However, how the proceeds are used – and who or what they go toward – are dependent on the needs of married couple and which types of joint life insurance they select, which are:

  • First-to-die life insurance
  • Second-to-die life insurance

In the case of first-to-die life insurance, the proceeds of the death benefit goes directly to the surviving spouse. From there, the spouse can use the funds however they please, including income replacement or unpaid debts such as a mortgage auto loan or tuition. They can also help the spouse with day-to-day expenses, especially if the surviving spouse relied on their deceased partner for income or was the primary breadwinner. Young couples who have children are ideal candidates for first-to-die life insurance.

The other option is second-to-die life insurance, which as its description implies, neither marriage or domestic partner receives because both have passed away. Thus, instead of going to the widow or widower, the proceeds of the resulting death benefit can go to a beneficiary or loved one that the policy delineates – such as the couple's children or extended family member – or for estate planning needs. These may include covering the cost of estate taxes, inheritance taxes or placed in a trust to be used by heirs once they're older.

More couples are discussing life insurance matters
Although life insurance for married couples may not have the same resonance and sentimentality as buying a home, starting a family or adopting a pet, more people are recognizing it as something they really need to talk about, if they haven't already.

Faisa Stafford, president and CEO of the nonprofit organization Life Happens, noted that discussing financial matters, particularly in long-term relationships, are no longer treated as the third rail.

"Over the past two decades, we've seen a shift with a growing number of Americans, particularly younger generations, being more comfortable discussing finances," Stafford explained. "These conversations are often the first step for people to feel secure both in their relationship and financially. In fact, 59% of people would feel more secure if they discussed getting life insurance with their partner."

Talking about life insurance as a couple and why it's important may be an added incentive to actually obtaining coverage, rather than knowing you need it, but not feeling necessarily inspired or obligated to get it. As a recent poll conducted by LIMRA found, 71% of male and 68% of female respondents acknowledged that they needed life insurance, but only 42% and 31%, respectively, said they had active intentions to buy it.

Sharing responsibility and knowing you have loved ones relying on you – whether that's your spouse or other beneficiaries – can serve as an added incentive to obtain joint life insurance, especially if the alternative is none at all.

What are the primary advantages of joint life insurance?
From single life insurance, to universal life insurance, term life or several others, there are numerous coverage options. What may be right for you may not be ideal for someone else.
The same is true for joint life insurance; it isn't for everyone, but it does have a number of benefits. Here are a few of them. They may apply to you and your partner's situation:

More affordable
Joint life insurance is the equivalent of bundling, particularly in terms of its cost. Bundling, for life insurers and property insurers alike, helps to lower premiums. But instead of buying multiple policies with one insurer – like renters insurance and car insurance – it covers two people in one single policy. This generally means it will cost less than if you were to buy single life insurance for two people.

Don't need to be married
Even though it's primarily used by married couples, tying the knot is not a precondition to obtaining joint coverage. As previously noted, it can also be an ideal option for domestic partners who share the same home or apartment (15% of young adults in the U.S. between 18 and 24 live with an unmarried partner, up from 0.1% in 1968, according to Census data). You may also not necessarily need to be living together to be eligible for this type of coverage, but you may need to provide some substantiation that you share assets.

Also, two business partners can take out a joint life insurance policy. In the off chance that one of the two passes away unexpectedly — or both do and it functions as  second-to-die insurance — the coverage can function as a buy-sell agreement. While both scenarios are rare, they do happen, and a buy-sell agreement makes certain that the business has the resources in place to resume or continue operations with someone else at the helm. This is another reason why joint coverage can make sense for family-owned businesses.

What are the main disadvantages of joint life insurance?
There are other pluses to joint life insurance, which your financial advisor can go over with you, but they'll also touch on some of the downsides. They include:

Receiving death benefit often takes a while
Getting the death benefit can be a lengthy process but that's especially true if your joint life insurance policy has a second-to-die arrangement. The beneficiaries of the policy won't receive it until both policyholders pass away, which may cause financial complications for them depending on their needs at the time.

Rates influenced by health
Similar to health insurance, the premiums you wind up spending are affected by your overall well-being. So if a married couple or one of the partners has a medical condition that risks their longevity, the savings typically found within a joint life insurance policy may not be available.

The perfect solution for you depends on your situation and that of your spouse or partner. If you're a high net worth individual or couple or own a family-owned business and want to keep it thriving if the worst case scenario were to occur, premium financing may be ideally suited for your needs. Global Financial Distributors specializes in life insurance premium financing. For more information, contact us today or have your financial advisor reach out.