Single versus joint life insurance: which to choose?

When couples start researching and planning their life insurance choices, a common question that arises is whether to opt for Single versus Joint life insurance. Once a couple determines they plan on spending a significant amount of time together – if not the rest of their lives – they typically share some financial responsibilities. 

Term life insurance is a great choice for couples to ensure all their temporary financial obligations are met in such dire circumstances, but there are choices when it comes to joint coverage. 

Let’s look at what these are, their positives and negatives and finally, which one is better.

What is Single Life Insurance?

Single life insurance is simply life insurance that covers only one individual. A single life insurance policy pays out the chosen lump sum benefit if the insured individual passes away during the ‘term’ or length of the policy. It is not tied in any way to a person’s marital status. When you read about life insurance, it refers to individual or single life insurance, unless otherwise specified.

In the context of a couple seeking life insurance:

• Both the partners can apply for and obtain their own single or individual life insurance
• The individual coverages can be customized to their respective needs. In other words, the partners can have their respective coverage amounts, coverage lengths, and even have respective beneficiaries for their policies, if they may so desire.
• If one of them passes away, the beneficiary will receive the proceeds of life insurance. The surviving spouse will continue to have coverage.

What is Joint Life Insurance?

A joint life insurance policy covers two or more lives. It is usually purchased by couples who want to cover themselves jointly under one policy.

It may also be purchased in a business context. By insuring the lives of two or more business partners, the death benefit can be used to settle any business liabilities upon the passing away of a key stakeholder. While it sounds simple, the exact way joint life insurance works depends on the type of insurance you choose: Joint first-to-die or Joint last-to-die.

What are the different types of Joint Life Insurance?

There are two types; joint first-to-die and joint last-to-die.

Joint first-to-die life insurance

Joint first-to-die is a type of life insurance where the full insurance coverage amount is payable upon the death of the first of the two or more individuals insured under the policy. 

In the case of a joint first-to-die policy covering couples; when either one of the insured individuals passes away, the beneficiary, who in most cases is the surviving partner, receives the death benefit. 

Similar to traditional term life insurance, the surviving partner can use the amount for whatever pressing financial needs they may have – be it mortgage protection, paying off other debts, or providing for the family by replacing lost income. Upon the payment of the claim, the policy generally expires and the surviving partner may no longer have insurance coverage, unless requested.

A joint first-to-die policy is best suited for those with a significant financial obligation that would fall on the surviving partner such as an outstanding mortgage balance or in cases where the surviving spouse depends substantially on the income of their spouse for their ongoing living needs. In such cases, the surviving spouse can use the death benefit to clear off the immediate financial liability or to take care of living expenses.

Joint first-to-die policies can also offer some unique benefits:

Insurability privilege: Within a limited period following the death of the first insured, the surviving insured can request continued life insurance coverage from the insurance company without undergoing new medical underwriting. However, such coverage is more expensive as it is offered as permanent life insurance and the premium is recalculated based on the current age of the surviving insured. Most companies will specify a maximum age for coverage eligibility of the second insured. 

Double payout on simultaneous deaths: Many companies offer a double benefit option on joint first-to-die policies, whereby an additional coverage amount will become payable to the beneficiary if both the insured die together or within a short time (45 or 90 days) of each other. 

Joint last-to-die

Joint last-to-die life insurance pays out once both insured individuals pass away. The deaths can happen simultaneously or years apart, but no payment is made until both the insured have died.

Let’s assume a couple takes out a 20-year joint last-to-die policy. There is no payout if only one insured individual passes away in year 10. Instead, the surviving partner needs to continue paying premiums for the rest of the term. Once the surviving partner also passes away, their chosen beneficiary receives the death benefit , provided it is within the policy term length.

A joint last-to-die policy is better suited for when there are no significant financial obligations on the surviving spouse. Instead,  the coverage is used to provide for final expenses or leave a legacy for children or other dependents, after both partners have passed away. Most couples that choose joint last-to-die policies name their children as beneficiaries to help ensure their future financial well-being.

Read more about how different types of life insurance work in Canada.

Positives of Joint Life Insurance

A joint life insurance pays out a claim regardless of which of the insured passes away.

Taking on one joint policy is generally less expensive than taking out two individual life insurance policies; this is great if you’re trying to tighten your household budget. However, keep this in mind: if an individual or both parties applying for joint coverage are young and in good health, then they could get two individual life insurance policies while only paying just a little bit more. 

Negatives of Joint Life Insurance

Joint life coverage allows only limited personalization. The amount and length of coverage has to be the same for each of the insured. 

Furthermore, a joint life insurance policy only pays out once. While obtaining two individual policies instead increases the cost, it means double the coverage as two independent policies each pay out on their own. 

Again let’s use our example of a 20-year term life insurance policy. With individual policies, if one member of the couple passes away in year 10, their policy pays out but the remaining partner’s policy is still active.

While we all hope our relationships last forever – that unfortunately isn’t always the case. If one finds themselves in a situation where they are no longer in a relationship with the partner with which they applied for a joint life insurance policy, it may prove difficult to split the joint policy into two individual ones with the same coverage. Instead, one may have to apply for life insurance again, and risk not qualifying at the same rating as before.  

Joint first-to-die coverage has another similar problem – if the surviving partner needs to find new coverage once the initial policy has paid out, it will be difficult or more expensive for them to find it later in life.

Read more about what affects the cost of life insurance here.

Which is better: Single or Joint First-to-Die Life Insurance for couples?

Why would you want joint life insurance?

Joint life insurance can be better suited for couples if:

• They want to align their premium costs to a limited budget
• They have one discrete need (such as a mortgage debt) and there would be no residual need for covering the surviving partner once a claim is paid.

Why would you want individual life insurance?

Individual life insurance can be better suited for a couple if:

• They have multiple needs such as providing protection for young children, or ongoing lifestyle expenses for the family. Individual insurance allows coverage to continue for surviving spouses, even if one of the spouses passes away and a claim is paid.
• They want coverage that is customized for each of the spouses such as different amounts or terms of coverage.
• They are able to pay the slightly higher premiums than joint coverage.

Can you get joint life insurance if you are not married?

Yes you can. As long as you have reasonable interest (also referred to as insurable interest) in the longer life of the other insured, you are able to get joint life insurance coverage. This insurable interest may be due to a personal relationship (in the case of spouses or common law partners) or due to common business interests like we mentioned above. Common-law couples are therefore eligible to apply for joint life insurance. 

What happens to a joint life insurance policy after divorce?

A divorce can get further complicated with a joint life policy. A couple can certainly choose to retain the original joint life insurance coverage, post the divorce, if they so intend to. But if they want their coverage to also go separate ways, then they have no other option but to cancel the joint policy.

Most joint policies will offer a limited period insurability privilege whereby upon divorce or dissolution of the union, any of the insured under the original joint policy can request for individual life insurance benefit, without undergoing new medical underwriting. Such coverage cannot exceed their pro rata share of the previous joint benefit. The premium is however always more expensive since it is based on the age of the insured at the time of the request. 

There is much more flexibility with individual coverage in the event of a divorce. Two respective individual coverages can continue to be independently retained. Although on most occasions, the individual owners may want to change beneficiaries if they had named each other as the beneficiary prior to the divorce.

Read more about life insurance and divorce.

Ultimately, while joint life insurance is slightly less expensive than taking out two individual single policies, it is not as flexible as individual term life insurance.

If you’re able, we would urge you to look at an individual or single life insurance policy for yourself and your partner when contemplating the best life insurance company for your needs.

The information above is intended for informational purposes only and is based on PolicyAdvisor’s own views, which are subject to change without notice. This content is not intended and should not be construed to constitute financial or legal advice. PolicyAdvisor accepts no responsibility for the outcome of people choosing to act on the information contained on this website. PolicyAdvisor makes every effort to include updated, accurate information. The above content may not include all terms, conditions, limitations, exclusions, termination, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details. In case of any discrepancy, the language in the actual policy documents will prevail.  All rights reserved.

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