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Joint Life Insurance

For couples especially, the question of life insurance is a particularly complicated one and requires a great deal of thought and planning prior to purchasing any policy. In previous generations, it may have been more common to simply have a life insurance policy on the primary breadwinner. However, times have indeed changed and there are generally two people working and contributing to the income in a household. Therefore, deciding on the best life insurance strategy is actually more complicated where family-run businesses and dual income families are concerned. Many financial and insurance advisors will recommend a joint life insurance policy as a means of saving money versus purchasing two separate policies.

Advantages of Joint Life Insurance

In truth, joint life insurance coverage may in fact cost less than maintaining two separate policies and it does offer several potential advantages for couples, including:

  • Help in estate planning
  • Versatility--can be set up to pay off upon death of first policy holder or when second policy holder dies

When Joint Life Insurance Is The Best Alternative

For couples who also happen to be owners of a family business, a joint life insurance policy is a great way to help ensure the continuation of the company without interruption due to estate resolution.

The joint life insurance policy can be written as a trust in the children’s name. When the second policy holder dies, the policy will immediately pass to the beneficiaries without ever having to be tied up in any proceedings involving the settlement of the estate.

Otherwise, business assets may need to be liquidated in order to cover estate tax liabilities which is why many family businesses do not survive into the second generation.

By providing the beneficiaries with immediate access to a joint life insurance policy that has been written as a trust, there is generally sufficient funds to cover the costs of funeral arrangements plus ensure the continuation of the family business.

There is typically no additional charge for an insurance company to write a joint policy as a trust and a financial advisor can help with other aspects of estate planning to ensure your beneficiaries have the resources necessary to handle the estate taxes without selling off business assets.

However, aside from estate planning, there is one other major advantage that comes from purchasing a joint life insurance policy.

When a couple still owes a major proportion of their mortgage and they don’t have mortgage life insurance, then a joint policy may be best.

The policy can be set up so that the payout occurs upon the death of the first person and the beneficiary automatically becomes the surviving policy holder.

The surviving beneficiary can then use the policy to pay off the remainder of the mortgage but there will be no additional payouts to children or other beneficiaries on a joint life insurance policy set-up in this manner.

When Joint Life Insurance Is Not The Best Alternative

However, while a joint life insurance policy is great for people with a family business and a shared major asset to protect for future generations, this may not be the best route to go for couples. In truth, the majority of couples are involved in dual-income households where there is not some shared family business. In most cases, the incomes are not equal which means a joint life insurance package may not be the ideal protection for your particular situation.


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