by Steve Rhodes

Joint Life Insurance Plans for Canadians

Getting joint life insurance can be an easy way to save cost on your total insurance premiums. A joint insurance plan covers two or more people’s lives with only one death benefit payout. Depending on how you set up the insurance you could save anywhere from 15% to over 50% in your monthly or annual insurance premiums.

Before you decide that getting a joint life insurance policy is right for you, this article will explore the pros and cons of buying group insurance. Also discussed here will be the most common uses for the two types of joint life insurance: Joint first-to-Die and Joint Last-to-Die policies.

The Advantages of Buying a Joint Life Insurance Policy

1.       Premium savings on a joint policy

If you buy a joint life insurance policy, the insurance company is only liable to pay out one death benefit, even if it is insuring two or more lives. The single payout does reduce the cost considerably on some policies, and can save you a lot of money over the many years you will pay the premium on a life insurance contract. Here is how an insurance company calculates the rates for a joint life insurance plan: A) If it is joint first-to-die life insurance, they will combine the two lives (typically a husband and wife) and come up with one older male client. If the couple were 35 and 33 respectively, the joint policy would be like buying a life insurance contract for a 40 year old man. B) If it is a joint last-to-die policy, the age calculation is for a younger man. Let’s take a husband and wife aged 55 and 54, the joint age would be like buying a policy on a 42 year old man. As you can see, the joint last to die would mean a big savings in premium because the joint age is so much less than the current age of the couple, meaning a much reduced premium cost.

2.       Survivor’s right to buy insurance without medical evidence

If one person in a joint life insurance contract dies, the death benefit is paid to the survivor, and then the contract ends. So what about the survivor? Do they still need to keep a life insurance contract? And if so, they are much older now and might have some health conditions making it harder to qualify for life insurance. The good news is that the survivor under these policies has the right to buy their own insurance contract equal to the face amount of life insurance they used to own in the joint policy, without providing medical evidence to qualify for the insurance. Most insurance companies allow you to make this purchase within 30 days of the joint policy being paid out, while a few others are allowing this purchase for 60 days from the end of the joint contract.

3.       Double payout for a “common disaster”

A common disaster is insurance industry terminology for both people who are insured under a joint life insurance contract dying within a very short time of one another or from the same event, like a car accident. If both people on the contract died together, or one died shortly after the other, the insurance company assumes that one of the two would have exercised their right to buy an equal amount of life insurance had they lived. Therefore, the insurance company pays out double the original death benefit to the beneficiaries.

The Disadvantages of Buying a Joint Life Insurance Policy

1.       Marriage or partnership breakdown can carve up a policy

When a married couple or business partnership purchases a joint life insurance policy for risk protection needs, there is a major problem if the union is dissolved. For most insurance companies, the joint life insurance policy will need to be divided between the two parties (ex-spouses). Each can keep half the insurance, but the full amount of coverage they had before is not given to each person. The cost will go up for having two separate policies vs. a joint policy, and if they need to top up their life insurance individually, they will need to qualify medically for additional coverage, plus pay the higher premium as a now older person for the top-up amount.

2.       Premium savings on joint first-to-die can be minimal

One of the biggest reasons people buy joint first-to-die life insurance is to save premium vs. two separate policies. Very often the cost of two separate policies can be very close to the cost of a joint first-to-die plan. If the additional cost is only around 10% higher, you can easily be justify the expense by knowing each person has their individual life insurance plan which they own, and will continue on, uninterrupted, if their partner were to

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