Joint life insurance is a form of life insurance that covers two people (or more) but only pays out its benefit once (exceptions apply…see below). Joint policies can be set up in 2 ways; joint-first-to-die (JFTD), or joint-last-to-die (JLTD) and provide for substantial cost savings compared to individual coverage costs.
JFTD is a great choice is situations where there is a joint liability where the insured people are dependent on each other. A good example of this is life insurance for the mortgage – when one of the insured people dies, the benefit is then paid to the surviving person (beneficiary) so they can then pay the mortgage. There isn’t a need to have individual coverage because the debt is no longer a concern after one spouse passes away. JFTD is usually recommended for younger people who are still in the wealth building and child rearing stage of their lives.
With many insurers now, if the joint insureds on a JFTD policy pass away at the same time or within 60 – 90 days of each other (depending on the insurer) they will pay a double benefit. This is great for ensuring that the guardian of your children has adequate funds to raise and care for your children. Also, if one spouse passes away, the surviving spouse is offered the privilege to continue coverage on himself or herself within 60 – 90 days.
JLTD is a great estate planning choice for people who are not dependent upon each other financially and have little to no debt. An example of this would be a retired couple who are no longer earning income but are living off of their savings. If one spouse dies, there isn’t a need for the other spouse to receive a death benefit because they will continue to live off of the retirement savings. However, the couple would like to leave a benefit to their heirs to cover estate expenses. Estate expenses and taxes are only due when the estate is transferred to the next generation, so no benefit is required until both spouses have passed away…hence Joint-Last-To-Die.
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