What is joint life insurance? 2024 Canada guide
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Discover the methodologyWhen it comes to planning for your future, life insurance is an essential tool that provides both financial protection for your loved ones as well as peace of mind. But have you heard of joint life insurance?
Joint life insurance offers an alternative option for couples who want to secure their financial futures together. Not only can it save you money, but it is also a convenient way to combine life insurance administration and reduce paperwork.
So let's explore what joint life insurance offers, its pros, cons, and more. Then, use our free comparator to compare the best plans and get free personalized quotes in seconds.
Joint life insurance: 4 key takeaways
- Joint life policies save money on premiums
- They offer convenience in only having to deal with one policy
- Joint first-to-die life insurance provides the surviving partner with financial protection
- Joint second-to-die insurance ensures an inheritance to dependents
What is joint life insurance for couples?
Joint life insurance is an incredibly convenient life insurance policy that offers combined coverage for not one, but two individuals under the same contract. This type of life insurance is specifically designed for couples who want the convenience of securing their financial futures together, instead of taking out separate policies.
Unlike traditional individual life insurance which is only tied to one life, joint life insurance will pay the death benefit to the surviving partner if either of the two named individuals passes away.
By paying out the death benefit to the remaining partner upon the first’s death, this policy ensures that the surviving individual receives the necessary financial security to maintain the same standard of living even if the worst were to happen.
The money is paid tax-free and can be used as the surviving partner sees fit to ensure their financial security.
Before we jump into the details, if you'd like to take a quick look at the best joint life insurance policies, you can do it right here. Use our free comparator below to explore plans and get free joint life insurance quotes from the most popular providers in Canada.
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How does joint life insurance work?
Joint life insurance policies in Canada work just like any other life plan. When an insured person passes away the death benefit is paid, tax-free, to the named beneficiary. However, with regard to joint life plans, the beneficiary is nearly always the other insured individual on the contract and so, the death benefit will in all likelihood be paid to the surviving partner.
Similar to traditional life policies, joint life policies are also made under one contract. This means that the two insured individuals only have to maintain one plan and pay one joint premium. It is also important to know that the premium for this policy is cheaper than the premiums would be for two separate insurance plans.
The following is a short breakdown of how joint life insurance works in Canada:
- Partners/couples apply for the joint life insurance policy at the same time
- Both partners are covered by one single policy with the same terms and conditions, death benefit, term length, limitations, and premiums
- Only one premium is paid jointly per month
- If either of the insured individuals passes away, the death benefit will be paid to the surviving partner, and the policy ends
Good to know
Joint life insurance is ideal for couples, but if you’re looking to protect your entire household, family life insurance might be a better option. It extends coverage to children and other dependents, providing comprehensive financial security. Learn more in our Family Life Insurance in Canada guide.
How much does joint life insurance cost?
Since joint life insurance costs less than two separate life policies, it is common for couples to consider these as they’re starting out in their careers and lives together.
But exactly how much joint life insurance costs is determined by the ages of the participating parties, their health and personal circumstances combined, in addition to the policy’s premium discount offered by the insurer.
While most providers in Canada do not disclose the discount on joint life insurance policies, it is common to assume a discount rate of 5%.
Below you can see example costs of two joint first-to-die (JFTD) 10-year term life insurance policies and two joint first-to-die 20-year term life insurance plans for a non-smoking male and female couple aged 30.
| Policy Plan | Joint First-To-Die Monthly Premium (assumed 5% JFTD discount) |
|---|---|
| JFTD 10-year term with $250,000 death benefit | $25.03 |
| JFTD 10-year term with $500,000 death benefit | $37.37 |
| JFTD 20-year term with $250,000 death benefit | $32.28 |
| JFTD 20-year term with $500,000 death benefit | $50.87 |
What are the two types of joint life insurance?
There are two main types of Canadian joint life insurance policies: first-to-die and second-to-die (also known as last-to-die).
- First-to-die policy: The first-to-die policy will pay the sum assured to the surviving partner upon the first person’s death. Once the death benefit has been paid to the other named insured party on the contract, the insurance policy will be terminated.
- Second-to-die policy: As the name suggests, a second-to-die policy will only pay the death benefit when both of the named insured individuals pass away. When this occurs, the death benefit will be paid to the beneficiaries listed in the contract as it would in a traditional policy.
If you’re finding it hard to decide between first-to-die or second-to-die policy, you aren’t the only one! The following points might bring some clarity on which type would be suitable for you.
First-To-Die Joint Life Insurance
A first-to-die policy is perfect for younger couples and families in the early stages of their lives and careers. By having this policy, couples can save money on premiums while still both having full life insurance coverage. Similar to traditional life insurance, if the worst were to happen, the surviving partner would be able to use the death benefit to replace the lost income and continue to live a fairly stable life.
Second-To-Die Joint Life Insurance
The second-to-die joint life policy, also known as a survivorship policy, is a good option for couples who are more settled, financially secure, and looking to leave an inheritance for their loved ones. This is because the survivorship life insurance plan only pays out when both the insured individuals have died.
It should be noted that a second-to-die policy should only be considered if the surviving spouse is able to cover the continued premiums by themselves. If the premiums cannot be maintained, the insurance policy will likely have to be forfeited due to non-payment of premiums.
What are the main benefits of joint life insurance?
The main benefit of both the first-to-die and second-to-die policies is to have full life coverage for two individuals while paying a lesser premium compared to if you were buying two separate policies and paying two full premiums.
Further advantages and disadvantages of these policies are listed below.
Pros
- Saving money: Joint life insurance policies are generally cheaper than purchasing two separate individual life insurance plans. By being more cost-effective, couples who are working on a budget are able to secure an adequate amount of coverage all while retaining a lower premium.
- Administrative simplicity: Managing one single live insurance policy for two people is much easier than handling two separate plans. Couples with a joint life plan only have to complete one application and pay one premium.
- Financial security for the surviving partner: The first-to-die policy provides peace of mind and financial security to the surviving partner if the worst were to happen. If couples don’t have the budget to pay for two policies, joint life insurance will provide both parties with coverage without them having to choose which of the two gets insured.
- Estate planning: The second-to-die policy is a good way for financially secure couples to ensure that a tax-advantaged inheritance is left for their dependents.
Cons
- Lack of flexibility: Joint life insurance policies are designed to cover two individuals with one contract. Due to this, however, it is not easy to separate or adjust the policy if needs arise.
- Potential for warped premiums: Since joint life policies are determined on the average age and health of both insured lives on the contract, it is possible that the premium may be skewed and more expensive for one of the parties if there is a significant age or health gap between the two.
- Financial burden: Since second-to-die life insurance policies only pay out once both individuals have passed away, the surviving partner may have trouble keeping up with the premium payments if one person dies unexpectedly.
What is the best joint life insurance in Canada?
There are several great insurance providers that offer joint life insurance in Canada; however, they might not be easy to spot because the joint life policy feature is usually listed as a specific coverage type within traditional policies.
For example, Canada Life offers multiple term life insurance and participating life insurance products: six in total. While these aren’t specifically joint life plans, Canada Life allows individuals to opt for a joint first-to-die (JFTD) coverage type within all these products and the option for joint last-to-die (JLTD) coverage within their participating life insurance plans.
Other Canadian life insurance companies that offer these policies include:
- Manulife Insurance: Manulife offers joint life coverage under their Family Term™ Life Insurance product which can insure two or more people under the same policy contract.
- BMO Insurance: BMO insurance provides partners with a joint first-to-die plan option on all their term life insurance, in addition to providing a joint last-to-die option on their whole life products.
- RBC Insurance: RBC Insurance has built in the joint first-to-die option into their term life insurance products. This option can insure up to 5 lives under one contract.
- Equitable Life of Canada: Equitable Life of Canada allows individuals to apply for the joint first-to-die option as a feature on their 10-year and 20-year term life insurance plans.
We recommend that you explore multiple plans before zeroing in on one. You can use our comparator below to compare the best joint life insurance plans in the market and get free personalized quotes in seconds right here.
Compare the best life insurance companies
What happens to joint life insurance after divorce?
The last thing on anyone’s mind when signing up for joint life insurance is what happens after divorce. Unfortunately, since these policies are a contract between all three named parties, the insurer and both insured individuals, it is not possible to split the terms of the contract to create two new contracts.
However, if couples choose to separate there are a few options to be had with this kind of policy. These include:
- Keeping the policy as it stands and dividing the premiums between both parties
- One partner can opt to keep the policy and pay the premium in full
- Name the surviving partner as a beneficiary through a trust for them to manage the finances for any dependents
- Cancel the policy
