Life Insurance for Couples: Joint vs. Separate Coverage
"I take you to be my lawfully wedded (husband/wife), to have and to hold, from this day forward, for better, for worse, for richer, for poorer, in sickness and in health, until death do us part."
This is the promise each partner in a couple makes to the other during a wedding ceremony at the church. But have you noticed anything about insurance? No, you did not promise to have adequate insurance during the wedding ceremony at the church. So what to do?
In reality, this issue is very important for newlywed couples, as this is the ideal time for them to determine whether to proceed jointly or separately. Your finances will be secured from lawsuits and accidents if you have the proper type and amount of insurance in place. As a result, you should now act more shrewdly as a couple to obtain the coverage you require.
Joint Life Insurance Policy
This policy covers both the husband and wife under one insurance coverage. In the event of any of them passing away, the policy ensures the financial security of the home.
We want to open a secret by saying that there is no restriction on who can be the policyholder of joint life insurance coverage. This means that not only couples but also parents and children, for example, can purchase the joint life policy to protect each other's future.
In the US, joint life insurance generally is bought by married couples, long-term partners, and business partners.
How It Works: When one policyholder passes away, the death benefit is paid to the second insured. The surviving policyholder will no longer have life insurance after receiving the death benefit because there’s no further life cover for the survivor. In the event that both policyholders pass away tragically, the sum guaranteed is given to the beneficiaries of the policy or the legal heir.
A joint life policy may also be set up as a “second-to-die” coverage, also known as life insurance with survivorship, which pays out the death benefit upon the demise of the first and second surviving insured.
The Types: There are three subtypes of joint life insurance policy:
- Level-term life insurance, which pays out a lump amount in the event of your passing before the policy's expiration.
- Whole of life insurance, which lasts till your death and pays benefits whenever that occurs.
- Decreasing term: The payout gets smaller as time goes on. It's frequently used to cover the decreasing sum needed to pay off a mortgage with a repayment plan.
As in all cases, here as well, your individual scenario will determine the type of coverage that works best for you.
Single Life Insurance Policy
This coverage insures just one person and provides a payout in the event that an individual passes away while the policy is in effect. You and your spouse are each free to have your own insurance coverage. In this way, the surviving partner will still have his/her own policy if one of you passes away. Additionally, spouses can customize each policy to meet their own specific needs by choosing different coverage levels and lengths.
How It Works: Single-premium life insurance requires policyholders to pay one upfront lump-sum premium, and then the coverage pays a permanent death benefit that extends until the policyholder dies. The initially paid capital, the age, and the health of the policyholder are all factors that affect the amount of the death benefit of a single-premium life insurance policy.
The Types: Single premium life insurance can have several types, like any kind of cash-value life insurance.
- Single premium whole life insurance comes with a fixed interest rate determined by the insurance company's investment track record and the general condition of the economy.
- Single premium universal life insurance, compared with the whole life policy, offers adjustable rates.
- Single premium variable universal life insurance allows the insured to invest the policy's cash value in sub-accounts that function similarly to mutual funds.
- Single premium indexed universal life insurance has no guaranteed earnings rate. In this option, a particular index, like the Standard & Poor's 500 Index, is linked to the growth of the cash value. You can select a predetermined earnings rate only for a portion of your cash value.