What Is First-To-Die Life Insurance?

What Is First-To-Die Life Insurance?
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What Is First-To-Die Life Insurance?

What Is First-To-Die Life Insurance?
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Joint life insurance is a form of coverage designed to allow married couples to share a single life insurance policy.

There are two types of joint life insurance: first-to-die, which pays out to the surviving spouse, and second-to-die, which provides a death benefit to beneficiaries when both spouses die.

This article will discuss joint life insurance policies, but in particular, its first-to-die insurance policy option, what it does, how you can benefit from it, and how it compares to second-to-die insurance.

What Is Joint Life Insurance?

Joint life insurance is an insurance policy that allows couples to purchase a single plan that covers both spouses. If both partners are young and healthy, a joint life policy is a good option and there are several types of cover you can get, including:

Level term: This policy type is in effect valid for a set period of time. Your coverage level and rates would remain unchanged throughout the policy's lifetime.

Decreasing term: Until the conclusion of the agreed-upon period during which your policy is active, your monthly premiums and payout amounts will decrease.

Increasing term: Until the conclusion of the agreed-upon period during which your insurance is active, your monthly premiums and payout amounts will increase.

Whole-of-life: Unlike term insurance, this form of policy is active for the rest of your life and pays out when you pass away.

Furthermore, there are two types of joint life insurance plans:

  • First-to-die policies

  • Second-to-die policies

In some situations, joint life insurance may be a more cost-effective solution than each person acquiring their own life insurance policy.

In the case of either partner's death, joint life insurance often covers couples or other partnerships.

Joint life insurance policies are normally sold as permanent life insurance, meaning that the coverage will stay in place for the rest of a policyholder's life.

However, there are joint life insurance plans that are presented as term life insurance. This means that if one spouse dies within the policy's term—typically 10 to 30 years—the beneficiary receives a tax-free benefit equal to the amount of insurance you’ve purchased. 

If the insured couple lives longer than the period, then they will not receive any benefits.

Terms You Should Know:

Premiums: These are monthly or annual amounts that policyholders pay to keep their coverage. 

Death benefit: This is the amount paid to the beneficiary of an insurance policy after the policyholder’s death.

Beneficiary: A person who receives the death benefit (payout) from a life insurance policy in the event of the policyholder’s death.

Cash value: This is the portion of your policy that earns interest and may be available for you to withdraw or borrow against in the case of an emergency.

A couple that is happy because they have Joint Life Insurance.

Source: Pexels

What Is First-to-Die Joint Life Insurance?

First-to-die insurance is a type of joint life insurance that is usually purchased by couples to cover both spouses. 

A major benefit of first-to-die joint life insurance policies is that they are typically less expensive than two separate plans. They also offer couples considerable peace of mind because they pay a death benefit to the survivor when one spouse dies.

For example, when one of the covered members dies, first-to-die joint life insurance pays out. However, with this policy, there is only a single death benefit payout.

Because a first-to-die policy has only one death payout, it can sometimes be less expensive than two separate individual life insurance policies. Having two separate plans means that each spouse will receive a payout when the other person passes away.

The death benefit for first-to-die insurance is meant to compensate for the dead partner's lost income. This will in turn enable the surviving partner to maintain their standard of living and pay debts or child-related expenses.

Key Point: Joint Life Insurance and Divorce

While it may not be pleasant to think about, separation or divorce is something to consider when you get a joint life policy. Splitting a joint life insurance policy can be challenging for divorced couples.

One option is to add a divorce rider that will split your life insurance coverage into two separate policies. Keep in mind that before the policy can be split, some policies require that the couple be divorced for a certain amount of time.

A happy couple playing jenga with their young child on their living room floor.

Source: Pexels

What Is Second-to-Die Life Insurance?

Second-to-die insurance, sometimes called survivorship life insurance, is the other of the two joint life insurance options for couples. 

After both partners on the policy have died, it pays out to the beneficiaries. It's usually designed for wealthy couples who want to shield their heirs from estate and inheritance taxes.

Other names for second-to-die life insurance include:

  • Last-survivor life insurance

  • Survivorship variable life insurance

  • Variable survivorship life insurance

  • Joint survivor life insurance

The majority of these second-to-die life insurance policies are permanent life insurance policies, such as universal life or whole life.

Advantages and Disadvantages of Second-to-Die Life Insurance

Advantages Disadvantages
Usually less expensive than two individual policies. May be problematic to split if the couple divorces.
Customizable with riders that can be fit to your needs. No payout on the death of the first partner, meaning no benefits for the surviving partner.
Can build cash value by investing a portion of your premiums.

Happy couple in their kitchen sharing coffee in the morning.

Source: Pexels

Key Point: What Is a Term Life Insurance Policy?

Term life insurance policies are contracts between policyholders and insurance companies that financially cover people in the event of their death.

Policyholders pay the insurance company a monthly premium and when the policyholder dies, the insurance company pays out a death benefit.

Term life insurance plans, however, only offer coverage for a fixed period. The word “term” simply means a length of time.

These periods typically last:

  • 10 years
  • 15 years
  • 20 years
  • 30 years

Who Should Consider First-to-Die Life Insurance?

The typical buyers of first-to-die joint life insurance are married couples with children. However, first-to-die insurance is also sometimes bought by business partners or people that have a financial relationship.

A first-to-die life insurance plan is a good choice for people who would need to cover debts when their partner or spouse dies.

It is also ideal to shop for first-to-die plans when you're young and healthy because that's when you and your partner are the most insurable. 

If one member of the couple is healthy and the other is unable to be insured due to health issues, these policies may be an alternative – albeit they may be more expensive.

How Does First- And Second-to-Die Life Insurance Compare?

A first-to-die joint life insurance policy ensures that your spouse can continue living in the same manner as they did after you pass away, but a second-to-die policy safeguards your heirs' inheritance.

Second-to-die policies pay out a death benefit only after both partners have died, whereas first-to-die pay out a death benefit when the first partner passes away. It does, however, only pay once.

Joint life insurance for the first-to-die policy is not a common plan, but it is offered by a growing number of mainstream and well-known insurers. 

It could be a less expensive option than purchasing separate individual plans to cover lost income if the primary breadwinner passes away. However, this isn't always the case.

Separate plans may be less expensive depending on your specific circumstances. It's a good idea to shop around and talk to a licensed professional insurer about your options.

Key Point: Do I Need First-to-Die Life Insurance?

If you are unsure about the benefits of joint life insurance policies, send your questions to Help@PolicyScout.com or call us at 1-888-912-2132 to get personalized assistance from one of our skilled Medicare consultants.

A happy family that is covered by Life Insurance.

Source: Pexels

What to Consider before Buying First-to-Die Life Insurance

There are many factors that may influence a person's choice when considering first-to-die life insurance, including their unique situation.

Let’s go over a few things to consider if you’re thinking about buying first-to-die life insurance.

Eligibility and Exclusions

Before you start applying for first-to-die policies, look at the eligibility conditions and exclusions that most plans have.

Policies may have eligibility requirements based on your:

  • Age

  • Health

  • Occupation

  • Other qualifications 

You may not qualify for this policy, and many others, if you take part in extreme sports or risky activities, or have certain health conditions.

Features

Not all joint life insurance policies are the same. Before you sign up, look at different policies and find out what the benefits, costs, and coverage will be for each. If you want to add specific coverage terms to your life policy, ask if you can add insurance riders.

Key Point: What Is a Rider?

A rider is an optional term of coverage that can be added to a life insurance policy, often at an additional cost.

Some examples of riders include:

Accidental death rider: If the insured dies as a result of an accident, an accidental death rider pays out an additional amount of death benefit. Normally, the additional benefit paid out in the event of an accident is equal to the original policy's face amount, doubling the benefit.

The insured's family receives twice the amount of the policy if the insured dies as a result of unintentional bodily harm. If you are the sole breadwinner in your family, an accidental death rider may be the best option because the double benefit will cover your surviving family's expenses.

Waiver of premium rider: Future premiums are eliminated under this rider if the insured becomes permanently disabled or loses their income as a result of an injury or disease before reaching a certain age. There can be serious problems if a family’s main breadwinner becomes disabled.

The rider exempts policyholders from paying the base policy's premium until they are ready to work again under these circumstances. A waiver of premium rider might be useful, especially if the policy's premium is expensive. 

Accelerated death benefit rider: An insured person who is diagnosed with a terminal condition that would significantly limit their lifespan can use the death benefits under an accelerated death benefit rider. Insurers typically advance a percentage of the base policy's death benefit to the insured.

When you die, insurance companies may deduct the amount you receive, plus interest, from the amount your beneficiaries receive. This rider is usually charged a minor premium or, in certain situations, no premium at all. Different insurers define "terminal disease" differently, so be sure you know what the rider covers before you buy it.

A happy family who have just bought First-to-Die Life Insurance.

Source: Pexels

Pros and Cons of First-to-Die Life Insurance

Before buying a joint life insurance policy, it’s important to compare the pros and cons of a first-to-die policy.

The table below shows some of the pros and cons of first-to-die life insurance:

First-to-Die Life Insurance: Pros and Cons

Pros Cons
In some cases, it may be cheaper than separate individual life insurance policies. Usually costs more for a joint permanent policy than for two separate term life policies.
Can be an option for a couple if one partner cannot get insurance due to health issues. Can cost more if one partner is healthy and the other isn’t.
Typically pays out sooner than individual policies. Not always easy to split when getting divorced or separated.
Provides coverage for at least one partner’s entire life as opposed to a limited period of time under a term life insurance policy. Surviving spouse must buy a new life insurance policy to be covered after their partner’s death.
Replaces lost income if one spouse is the sole breadwinner. The surviving spouse is left without life insurance coverage after the payout.

Happy couple and their young child buying groceries at the supermarket.

Source: Pexels

Where Can I Learn More about Life Insurance?

If you’re interested in buying first-to-die life insurance, learning about the various levels of coverage, or interested in the benefits of different life insurance policies, we’ve got the latest information and articles to help you find a plan.

If you’re interested in finding out more about other life insurance options, such as term, permanent, group, or final expense insurance, visit our life insurance hub to learn more.

If you’re looking for joint life insurance or want to find out which plans are best, get in touch with one of our consultants for personal and tailored advice. Send us an email at help@policyscout.com or give us a call at 1-888-912-2132.

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