Looking for joint first to die life insurance? There’s a better option.

You may assume that you are looking for joint first to die life insurance – if you or your spouse should die, it’ll pay on the first person’s death and the surviving spouse is then looked after. And that’s true. You may also assume that this coverage comes with a substantial discount over two individual coverages – but it turns out that this is not the case. And lastly, joint first to die has some hidden deficiencies that can become extremely important in many situations.

Joint first to die life insurance pricing

So, we would assume that a policy that pays out only on the first of two person’s death would be substantially cheaper than a policy that covers two people individually. And in decades past that might’ve been the case.

Joint first to die life insurance policies today do pay out on the first person’s death, by definition. But most joint first to die policies also have a provision that says if both people pass at the same time they’ll pay two death benefits. And they also typically have a provision that says when the first person passes, they’ll pay the death benefit and then the survivor has the option of getting a new life insurance policy on themselves, without a medical exam. These additional benefits make the death benefit coverage very similiar to two individual coverages.   

Here’s an example of pricing. Male and Female, both age 35, $1,000,000 of term 20:

Joint first to die: $85.59/month

Two individual coverages, $1MM each: $89.91/month

So, only $4.32/month savings for a joint first to die. There’s some savings there, but I’d suggest not enough to justify any possible drawbacks – which we’ll see next.

Joint first to die life insurance drawbacks

The first drawback with a joint first to die life insurance policy is the inability to detach and seperate coverages. In the future if you want to seperate the coverages and go your own way, you likely will not be able to do so with a joint first to die coverage. Conversely, this is very easy to do if you have two individual coverages.   

Scenario 1: Divorce/marital breakdown. In situations like this, nobody wants to be on a life insurance policy with their former spouse – they want to carve off their coverage, change the beneficiary, and go on their way. Since you can’t seperate coverage with a joint first to die policy, both spouses are now forced to cancel their existing life insurance and purchase new coverage – at a now older age and higher premium, and uncertain health status at that time.

Scenario 2: One spouse becomes uninsurable. As soon as one person becomes uninsurable it’s common to re-evaluate your life insurance decisions and take advantage of policy provisions like conversion. The other, still-insurable spouse may want to keep their existing coverage. But if you’re in a joint first to die policy, you both have to change your coverage to accomodate the uninsurable person – a move that can cost substantially and can be detrimental to the insurable person’s insurance. Better to have two individual coverages and be able to treat each person’s coverage seperately in this case.

Scenario 3: Loss of age-based benefits. A joint first to die life insurance policy can cause you to lose some very important policy benefits that expire at a certain age. Lets say conversion expires at age 70. With individual coverage lets say you’re 50 with a 20 year term life insurance policy. So you have conversion for the full 20 years – great!

But with a joint first to die life insurance policy, your ‘age’ isn’t your age – it’s an older age. Life companies take the two insureds and create a combined ‘equivalant age’ which will be older. So two 50 year olds may have an equivalent single age of 57 – and that’s the age that the policy is based on. Now if conversion expires at age 70, you lose if after 13 years instead of 20 years in the previous example. That leaves you without the conversion option in the last 7 years of a term 20 policy – and those last 7 years, as you get older, are exactly when you would likely need the conversion option. With joint first to die, you can lose access to this (and other) policy benefits. With two individual coverages you both retain the policy benefits to the actual expiry age.

And there’s the final tradeoff – some scenarios that may not come about, but if they do can cause serious problems with joint first to die life insurance policies, vs. A very minor decrease in premiums. In our opinion those drawbacks are not worth the savings but now you’re aware of the drawbacks and premium differences you can make your own educated choice.