If you and your partner already share major commitments like a bank account, a home, or even a business, have you considered sharing an insurance policy as well? Joint life insurance, often known as 'joint last-to-die' coverage, could be a smart option for both of you. Unlike single life insurance policies, which cover one person and pay out when that individual passes away, joint life insurance is a single contract that covers two lives and pays out only after the second person dies. This makes it particularly useful when you and your partner have shared responsibilities or liabilities, such as estate taxes or debts that would only need to be settled after both of you are gone.
A key reason people consider joint last-to-die coverage is for efficient tax planning. When one spouse passes away, assets can typically be transferred to the surviving spouse without immediate tax consequences. The tax liability on any accumulated capital gains is postponed until the death of the second spouse. A joint last-to-die policy provides a lump sum payment at just the right time, matching the tax-free insurance payout to when the tax bill is due, which helps minimize the impact on your estate.
Traditionally, older generations tend to favour fixed-income investments, which are often subject to both low returns and higher taxes. This can lead to eroding the value of the estate you wish to pass on. In situations where the surviving spouse doesn't need immediate access to cash, joint life insurance can serve as an effective tool to maintain estate value, while reducing the tax burden in the long run.
Is Joint Insurance More Expensive?
The good news is that joint life insurance is typically less expensive than purchasing separate individual policies for both partners. Since the insurance company bases the premiums on the joint life expectancy of both individuals, which is statistically longer than just one life, the cost of a joint policy is lower. And just like individual policies, you can count on those costs being fully guaranteed.
Joint life insurance can be a practical, affordable way to ensure that shared financial responsibilities are covered and that your estate is preserved for the next generation. It’s worth considering if you and your partner are planning for the long term.
Next Steps
If you think joint life insurance might be right for you, contact Garrett Agencies today. One of our professional licensed advisors can help you explore your options and create a plan that fits your needs.