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Joint life insurance policy is most often used by couples. The main principle of joint life insurance is that it covers two people who are usually life partners or legal partners. As a result, there is no need to buy separate life insurance policies for each partner as this type of policy ensures the payments in case one of the partners’ dies. This kind of policy is often bought at the same time when the mortgage is taken, child is born, the retirement term is coming and in other similar situations.
Moreover, it is common that joint life insurance is used as a term life insurance. It means that many of the principles that are used for single life insurance policies are also true for joint policies. However, joint life insurance in most cases is a more convenient option because none of the partners are left uninsured. The couple must choose for how long they want their protection to last, what amount of cover they need and after that their premiums are calculated.
First of all, for some people having one life insurance policy instead of two may seem as a more convenient option than having two separate life insurance policies. This situation is very common among people that are married or conduct business together as partners. In such case both partners have the same attitude towards the object that they want to protect by by buying life insurance policy.
Moreover, as joint policy pays out only for the death of only one partner, it is usually cheaper to have joint life policy. Thus, joint life insurance can be seen as an attractive option when objectives of the partners are the same. For instance, a married couple wants to provide a sound future for their children and have enough money to repay the mortgage. In this case, two separate single life insurance policies may seem an expensive and unnecessary solution.
Joint life insurance policy has some disadvantages. Firstly, it uses “first-death” rule. In other words, it insures only one death of the partner who died first and if something happens to another partner such an insurance policy does not pay anything for the dependents. As a result, after the death of the first partner, other is either left with no life insurance policy or need to take out single life insurance.
However, it also must be taken into account that at the time when other partner died, the surviving person is older or has medical problems. Consequently, getting single life insurance at affordable rates can become a hard task to accomplish. One more thing to consider is that both persons can die at the same time. This can happen in a car accident or the fire of the house. In this case the dependents will only get a death benefit for one of the partners.
Moreover, it becomes difficult to cancel or divide the insurance policy if partners get divorced. Usually insurance companies do not even give an options to somehow divide that insurance policy or if they do, higher premiums are required to be paid. It is natural that if a couple is no longer together, than their relationship becomes not the best suited for having agreements. Thus, having joint life insurance can create problems for the couples in the future.
One more thing that can be viewed as a disadvantage is that conditions of the contract depend from the medical history of two people. It may be harder to take out a policy at a very good terms as there is always a higher possibility at least one of persons from the couple may have some medical conditions. Since insurance companies pay for the death of the first person, they charge higher premiums because the risk that the partner who has worse health condition dies first is higher.
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However, as an alternative for joint life insurance policy single life insurance policy can be used. It is must be taken into account that with single life insurance policy it is possible to insure either one of the partners’ or both of them. The difference is that in the first case the other partner gets money if only the insured one partner dies. If joint life insurance is used, it does not matter which one from the couple dies, the other partner gets a pay-out.
However, if two single life insurance policies are used, they generally cost more than joint life insurance policy. Furthermore, if one of the partners has some medical problems, his insurance would cost much more compared to the rates of life insurance for his healthy partner. In such case, the risk may be taken and only one individual from a couple may be insured in order to save money by having to pay smaller premiums.
One of the biggest advantages of having two separate single life insurance policies is that there is no need to search for a suitable single life insurance after the first-death rule has taken place and joint cover ceases to exist after the claim has been made. Moreover, there is no guarantee that people would live together for the rest of their lives. In such case having two separate single life insurance policies may be a better decision as it saves people from the trouble of dividing or terminating joint cover.
Even though more common is joint life insurance that uses first-death rule, sometimes another type of joint policy can be used. It is called last death insurance. As the name implicates, the benefit in such case is made after the second death of the partners. At the first look, the usefulness of this type of insurance may seem questionable. Indeed, first-death rule makes more sense as the time difference between both of the deaths in some cases can be huge. Nevertheless, there are two main reason why people sometimes purchase joint life insurance with last-death rule. First of all, the premiums are lower as the risk for insurance provider is much lower in such case. Another reason is that people want to leave the money to their children. The policyholders believe that in such case their partner would be able to survive after their death. However, they want to leave the money for their children that would face huge financial obstacles after both of their parents are dead. Similar situation can be seen in the case when two partners are nor married but conduct business together.