Alternatives to Joint Life (First to Die) Life Insurance

The principal alternative for a Joint Life (JL) policy is separate single-life policies on each insured. If the need for insurance terminates at the first death, JL is the more cost-effective method of insuring the risk. If the need for insurance on the survivors will continue after the first death, often separate policies on each insured or some combination of JL and survivorship life might be a better alternative. If the need for insurance on the survivors is uncertain or the amount of coverage required on the survivors is uncertain, guaranteed insurability options on JL policies may provide “wait-and-see” flexibility in determining whether to exercise the full option on each insured after the first death.

WHERE AND HOW DO I GET IT?

JL is somewhat more of a “specialty” item than in the past but a number of insurers still offer a variety of forms. A fair number of insurance companies offer some form of term or permanent JL plan insuring two lives. Fewer companies offer JL products insuring three or more lives.

FEES AND ACQUISITION COSTS

Insurers offer JL policies in a number of configurations including annually renewable term, level term, ordinary life, current assumption life, universal life, and as additional insured riders to single life policies. The various policy fees, charges, expenses, and commissions associated with JL policies are similar to those of comparable single-life policies relative to the premium. However, because JL policies usually require evidence of insurability for each named insured, the issue expenses associated with underwriting the policy will be proportionally higher than for single-life policies with comparable death benefits. Premiums, of course, will also be correspondingly higher, because the insurer must assess yearly mortality charges that are essentially equivalent to single-life mortality charges on each insured.

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