When it comes to a joint life insurance policy, this is beyond just a premium as it needs consents, agreement and probably a sign off. There is definitely more, tag along to get to it!
A joint life insurance policy insures two people with a single policy and a single premium, typically at a lower rate than two separate policies.
It pays a death benefit to beneficiaries when the first to die passes away, or the second, depending on the policy.
Business partners can use joint life policies to ensure business continuity or buy shares from the surviving partner.
Types of Joint Life Insurance
Joint life policies tend to be cheaper compared to when each person had two individual policies.
- First-to-die: Pays a death benefit when the first to die passes away.
- Second-to-die (Survivorship): It only pays the death benefit when both persons who have taken the coverage expire.
They may be an ideal option for couples or business partners, especially where one of them would not qualify for coverage on an individual basis or for the convenience of estate planning.
Also, the beneficiaries of policyholders are normally each other, although they can designate other beneficiaries, like children or business associates.
It is no fake news that, joint life insurance covers two people under a single policy, providing economic security to the heirs in the event of death of one or both the policyholders, at a comparatively lesser premium than individual policies
Who is Eligible for a Joint Life Insurance Policy?
Two individuals are covered under one policy under joint life insurance, typically spouses or partners of a business. Policy types are first-to-die (pays in the event of the first death) and second-to-die (pays in the event of the death of both entities).
The Joint life term insurance covers two members. Both the pears who are insured pay the premium for the term, and the pay-out is first death basis. If a policyholder is murdered, the sum assured is paid to the surviving policyholder.
Is it a Better Idea to Buy Joint Life Insurance?
Individual policies allow you to choose the level of payout you need personally. A joint policy is useful if you both need the same level of cover for the same amount of time.
It is often used to pay back your mortgage. If either partner dies, you know that the other partner will have money to settle the debt. Both of the partners are covered for the same amount, so the payout is the same regardless of who dies.
The most important thing to know about a joint life policy is that it pays out once, normally when the first partner dies. Once this has happened, the policy instantly terminates, leaving the other partner with no cover remaining.
What is the Treatment of Joint Life Policy?
Under this method, the premium paid on a Joint Life Policy is treated as an expense and is dealt with against the profit/loss of the firm in the same way as other expenses.
Hence, the policy amount is treated as a gain for the firm and is distributed equally among all the partners in their earlier ratio
There are also a few other adjustments you can make to your life insurance policy. For example, you may ask to remove a name from a joint life insurance policy, or change the way you pay your premiums (yearly or month-to-month) with terms and conditions.
How is the Debt Repaid to a Deceased Partner?
The payable amount is transferred to the Executor’s Account of the Deceased Partner, and then the executor’s account is paid by makinga payment to the legal representatives. Joint Life Insurance is normally put in place to pay out on the death of the first person when the policy is still in force.
A Joint Life Second Death Whole of Life Plan is put in place to pay on the second death, and because it is a whole of life plan, it pays out whenever they die if premiums are paid.
What Becomes of Life Insurance When the Beneficiary Passes Away?
When the main beneficiary for a life insurance policy dies before the insured, the death benefit usually goes to a contingent beneficiary (or second beneficiary) if one was named.
In the absence of a contingent beneficiary, the money will go to the estate of the insured. The first person or organization you name to receive the death benefit.
A secondary beneficiary who receives the death benefit in case the primary beneficiary dies before the insured. If no contingent beneficiary is named, the death benefit goes to the estate of the insured and follows the same probate process as other property in the estate.
If you have multiple primary beneficiaries, and one dies, the death benefit will typically be distributed to the other remaining primary beneficiaries.
You should review and update your beneficiary designations periodically to ensure that your wishes are carried out, especially if you have a change in life, like marriage, divorce, or having children.
In the exceptionally rare situations where the beneficiary and the insured individual die around the same time, the life insurance company is confronted with the dilemma of determining who died first to determine who receives the payment.
Bottom Line
The Insurance Company pays the Joint Life Policy sum at policy maturity or the death of a partner, whichever occurs earlier. The surrender value at the death of a partner is shared by the surviving partners and the legal heir of the deceased partner.
The Insurance Company pays the face value of the Joint Life Policy on the maturity date of the policy or the death of a partner, whichever is earlier. The surrender value on the death of a partner is divided among the remaining partners and the legal representative of the deceased partner.
