What is a First to Die Life Insurance?
First-to-die insurance policies are a type of joint life insurance typically purchased by couples to cover both spouses. The policy pays a death benefit to the survivor when one spouse dies. First-to-die joint life insurance is often less expensive than two individual policies.
How First-to-Die Joint Life Insurance Works
First-to-die joint life insurance pays out when one of the covered members dies. There is only one death benefit paid by these policies. Once the first partner dies, the survivor no longer has life insurance coverage under the policy.
This differs from having two individual policies which each pay out when the insured dies. But because there is only one death benefit with a first-to-die policy, it can sometimes be cheaper than two separate individual life insurance policies.
The death benefit is intended to replace the lost income of the deceased partner. This helps the surviving partner maintain his or her lifestyle and pay debts or child-rearing costs.
- Insures more than one life with one policy
- Pays only one death benefit
- Pays only when the first insured dies
- With the appropriate rider, can be split into individual policies in the event of separation or divorce
First-to-die policies differ from second-to-die, or survivorship, joint life insurance which pays out only after both partners die. Survivorship life insurance is generally used for estate planning and intended to preserve a couple’s legacy for their heirs.
If you and your partner or spouse consider a first-to-die joint life insurance policy, you should consider the possibility, no matter how remote, that you may one day separate or divorce. Joint life insurance policies can be difficult to split if that happens.
Ask your insurer about a divorce rider that allows you and your partner to split the policy into two individual policies.
Who Should Consider First-to-Die Life Insurance
Married couples raising a family are the typical buyers of first-to-die joint life insurance. But business partners or other people you have a common financial relationship with may also consider first-to-die insurance.
For couples, you may want to consider first-to-die joint life insurance if the death of either spouse would create a need for money to pay debts and pay expenses.
It’s best to shop for first-to-die policies while you are young and healthy — when you and your partner are most insurable. But these policies can also be an option if one partner is healthy and the other can’t be insured for health reasons — though it may be more expensive.
- Eligibility and exclusions
- Policies may have eligibility requirements based on age, health or other qualifications. Be aware that you may not qualify if you take part in extreme sports, risky activities or have certain health conditions.
- Consider what may happen to your kids in the event of one parent’s death and make sure the policy covers their needs. Also consider whether you want your children covered by the policy.
- Not all joint life insurance policies are the same. Compare features from different policies to make sure you are getting the coverage that’s right for your circumstances and situation. Ask about riders that can better tailor the policy to your needs.
First-to-Die Life Insurance Advantages and Disadvantages
First-to-die life insurance was more common when American families had a sole breadwinner. They were designed before both spouses typically worked and families relied on a joint income.
Before buying a joint life insurance policy, it’s important to compare the pros and cons of a first-to-die policy. And it helps to talk to a licensed insurance professional to help you determine if such a joint life policy is right for you.
- In some cases, it may be cheaper than separate individual life insurance policies
- Can be an option for a couple if one partner is uninsurable due to health issues
- Typically pays out sooner than individual policies
- Provides coverage for at least one partner’s entire life as opposed to a limited period of time under a term life insurance policy
- Replaces lost income if one spouse is the sole breadwinner
- Usually costs more for a joint permanent policy than for two separate term life policies
- Can cost more if one partner is healthy and the other isn’t
- Not always easy to split in divorce or separation
- Surviving spouse must buy a new life insurance policy to be covered after partner’s death
- The surviving spouse is left without life insurance coverage after the payout
7 Cited Research Articles
- California Department of Insurance. (2018, March). Life Insurance Guide. Retrieved from http://www.insurance.ca.gov/01-consumers/105-type/95-guides/07-life/life-ins-guide.cfm
- New York State Department of Financial Services. (2012, October 29). Individual Joint Life Insurance Product Outline (including Joint Life First-to-Die Products and Joint Life Survivorship Products). Retrieved from https://www.dfs.ny.gov/system/files/documents/2021/04/out_ind_joint_life_10292012.pdf
- The American College. (2008). Whole Life Insurance. Retrieved from https://bbcontent.theamericancollege.edu/Course/BbC/07_FA/257/Text/05-257TB-2008-Chapter04.pdf
- AARP. (2007). Life Insurance. Retrieved from https://assets.aarp.org/www.aarp.org_/articles/money/financial_planning/LifeInsurance.pdf
- New York State Department of Financial Services. (n.d.). Types of Policies. Retrieved from https://www.dfs.ny.gov/consumers/life_insurance/types_of_policies
- Arizona Department of Insurance and Financial Institutions. (n.d.). Glossary. Retrieved from https://difi.az.gov/mphaea-glossary
- Washington State Office of the Insurance Commissioner. (2017, June). A Consumer’s Guide to: Life Insurance; What You Should Know about Shopping for Life Insurance. Retrieved from https://www.insurance.wa.gov/sites/default/files/documents/life-insurance-guide_0.pdf