Joint Life Insurance for Couples Explained

What is joint life insurance?

Joint life insurance is a single policy covering two people, often spouses or common-law partners. If one partner passes away while the policy's active, the beneficiary gets a tax-free, lump-sum payment that they can spend however they wish.

The key caveat with joint life insurance policy for couples? While joint policies can sometimes be cheaper, they only pay a death benefit out once. And if you ever break up, separate or get divorced, splitting the policy up can be a headache.

How does joint life insurance work in Canada?

Joint life insurance provides a death benefit ensuring a financial safety net for your partner, surviving spouse (or other dependents) if you pass away.

Here's how joint life insurance policies works in Canada:

• The couple applies at the same time and both partners are covered under the same exact terms (coverage amounts, term lengths, etc.)
• The couple pays one premium per month, with only one death benefit payout
• The policy expires after the payout so the surviving spouse will need to apply for another policy if they need insurance coverage
• Joint life insurance policy can be either temporary or permanent

What type should you get? Term insurance works best for couples, common law (unmarried couples) and families; it provides for “temporary” dependents, like your kids before they grow into adulthood. It's also useful when debt, like your mortgage, is at its highest.

PolicyMe has some of Canada's most affordable term life insurance rates, plus $10,000 in free child coverage. See how much couples term life insurance might cost. No commitment necessary:

What happens to a joint life insurance policy after divorce?

A joint life insurance policy can be tough to divide if you and your partner decide to divorce or separate. This is the main reason that many life insurance experts advise against combined insurance policies. Here are your options if you need to split up a joint policy:

• Name each spouse as the beneficiary in trust to manage the financial benefit on behalf of the kids
• Keep the policy as-is (i.e. forgo splitting it)
• Transfer the policy to one spouse
• Cancel the policy outright
• If your partner doesn't agree to split the policy, you may be out of luck

Types of life insurance for couples

There are three main types of joint life insurance policies: first-to-die policy, last-to-die policy (or second-to-die policy), and combined life insurance.

Let's take a look at the basics of each type of policy to see if they are a good choice for you.

What is joint first-to-die life insurance?

A Joint first-to-die policy is a type of life insurance policy that pays out a death benefit when the first partner passes. The policy ends after the payout, so the surviving partner would have to apply for a new policy if they want one.

A first-to-die policy can cover expenses such as a mortgage, debts or childcare.

It is a good option for couples who share financial responsibilities. Two separate individual policies could end up being costly in the long run compared to a joint coverage option.

First-to-die is also a good option if the first person is the main or sole breadwinner. In cases where the second person has major financial needs like health problems, or even a special need child, this type of coverage provides financial support to keep loved ones financially afloat in times when they need additional support.

Joint first-to-die may be a good choice if you have:

• Living expenses paid for by one person
• Large financial obligations (like a mortgage)

What is the main drawback for this type of joint coverage? Once there's a payout after the first death, the policy is no longer active. If the surviving partner wants coverage, they'd have to buy a new policy.

What is joint last-to-die life insurance?

Joint last-to-die life insurance pays out a death benefit when the last surviving partner passes. Last-to-die is also called survivorship life insurance.

This type of life insurance for couples is best used to support the kids because the surviving partner doesn't get a payout when the first person passes.

Joint last-to-die may be a good choice if you're concerned about:

• Your beneficiaries paying estate and inheritance taxes
• Leaving savings behind for your loved ones

The couple can name their children as the beneficiary to ensure financial stability after both parents are gone. It can also be used to reduce any estate taxes and reduce end-of-life costs for the surviving family (like funeral expenses).

The bottom line? Joint last-to-die policies are best used for complex estate planning purposes. Couples can use a last-to-die policy to ensure their children's future.

What is combined life insurance?

Combined life insurance isn't a joint policy at all; it's two combined insurance policies with different terms, conditions and payouts. When each partner holds their own policy, two separate death benefits can be paid out.

“Combined life insurance is individual coverage, but the plan is combined saving the couple some money on admin fees, discounts, etc.”
— Ivana Govedarica, Licensed Advisor at PolicyMe

Here’s how these 3 main types of life insurance for couples compare:

Combining two individual life insurance policies is generally a safer and more flexible choice. Both partners hold their own policies on their own terms.

Joint life insurance: pros and cons

Pros of joint life insurance

• Less costly: Joint life insurance can be cheaper than buying two separate policies.
• Easier application: Applying for joint coverage can be quicker and easier than going through two individual applications.

Cons of joint life insurance

• Only one payout: With joint first-to-die, it means that the surviving partner gets a payout, but has no coverage. With joint last-to-die, the first surviving partner won't get a payout.
• Hard to divide: Joint policies can't easily be split up if you decide to divorce or separate. You can keep the policy as-is, transfer it to one spouse or cancel.
• Harder to get coverage later: If you have a first-to-die policy and your partner passes away, or if you choose to separate, you’ll need to buy life insurance again.
• Not flexible: Both partners are covered for the same amount and length. If you and your partner have different needs, separate policies are a better option.

Joint vs individual life insurance: Which is Best?

Joint life insurance policy is a single policy that covers two people, with one premium. A joint life insurance policy can be cheaper than buying two separate individual life insurance policies. On the flip side, individual life insurance gives you the flexibility to pick different lengths, conditions and coverage amounts for you and your partner.

A joint life insurance policy is the better option if:

• You and your partner have a big age gap
• One of you is in poor health
• One partner is a smoker, and the other is a non-smoker
• One partner is financially reliant on the other
• You have just one main shared debt, like a mortgage

Individual life insurance policies are the better option if:

• You want different levels of coverage
• You want to shop around; there are lots of term options
• You're 40 or younger
• Both of you are of average health
• You want to skip the headache of splitting the policy if you break up

The long and short of it is that joint life insurance policy is best suited for couples in very specific life situations. It's usually a better idea for each partner/spouse to get a single life insurance policy that is tailored to your particular needs.

Where do you buy joint life insurance in Canada?

There are a few joint life insurance companies where you can buy joint life insurance policies in Canada:

1. PolicyMe: We don't offer joint policies, but a first-year 10% discount on premiums when couples apply together, with $10,000 in free child coverage for the whole term.
2. BMO: The "Special Death Benefit Option” means you can get a death benefit on the first death while having a joint-last-to-die policy.
3. Canada Life: Choose from multiple riders to add to your joint policy, such as child coverage.
4. ivari Life: Offers the option of joint policies for up to five people, but prices that are higher on average.
5. Manulife: Affordable joint policies and an extra 3% in savings for couples who choose the same policy length and coverage amount.
6. UV Insurance: The only carrier in Canada that offers joint first-to-die term life insurance without medical.

Why should married couples and newlyweds consider life insurance?

Married couples and newlyweds should consider life insurance for several important reasons:

1. Financial Protection: Life insurance provides a financial safety net for your spouse or partner in the event of your death. It ensures that they will have financial support to cover expenses such as mortgage payments, debts, daily living costs, and future financial goals, even in your absence.
2. Income Replacement: If one spouse passes away, their income might be lost, impacting the surviving spouse's ability to maintain their standard of living. Life insurance can replace this lost income, helping the surviving spouse cover expenses and maintain financial stability.
3. Debt Coverage: Life insurance can help cover outstanding debts, such as a mortgage, car loans, or other liabilities, preventing the surviving spouse from shouldering these financial obligations alone and providing financial security.
4. Funeral and Final Expenses: The cost of a funeral and other final expenses can be substantial. Life insurance can alleviate the financial burden on the surviving spouse by covering these costs.
5. Future Planning: Life insurance can also be a part of a couple's long-term financial planning. It can help in building savings, funding education for children, or providing an inheritance for future generations.
6. Locking in Rates: Obtaining life insurance at a younger age can mean lower premiums, as rates often increase with age and potential health risks. Getting coverage early can lock in lower rates, providing cost savings in the long run.

Considering life insurance as a married couple or as newlyweds can offer peace of mind, knowing that your partner will be financially supported in case of the unexpected. It's crucial to assess your financial needs and goals together and determine the appropriate coverage amount and type of life insurance that best fits your circumstances.

How much life insurance coverage do married couples need?

The amount of life insurance for married couples needed will depend on a few factors. For example, things like debts, income, financial obligations, existing policies, etc. will play into how much coverage is needed.

‎These questions will help you think about how much life insurance you need for your family’s financial well-being in the face of an unexpected death.

Sample questions for evaluating life insurance needs:

• In your absence, do you need mortgage payments covered?
• What other large debts, loans, etc. would you leave behind?
• Would you want to cover final expenses?
• If you have kids, how many years of financial security will you leave them? What about their education/tuition?
• How long does your partner or spouse have until they retire?
• Would they need an income replacement without you around?

Calculate how much income you'd need to provide for your family, along with an estimate of how long that coverage will be necessary to keep your family afloat.

Generally, coverage amounts can range between 5-10 times the holder's salary. The average Canadian household is insured for about $442,000, reports the Canadian Life & Health Insurance Association.

How much does life insurance for couples cost?

The cost of life insurance for couples will depend on your particular policy needs and where you are at in your life journey (i.e. age, health). But your couple life insurance rates may surprise you: get a quote in a few clicks, apply in 20 minutes and get the peace-of-mind you deserve. PolicyMe is the only Canadian insurer with free child coverage!

Not sure if you and your partner are ready for the full-on application yet? Get your online quote and come back to it later — no commitment necessary.

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When is the best time for couples to get life insurance?

The best time for couples to get life insurance is when either of them depends on the other's income. Are you in a relationship with shared financial obligations and dependents in your care? If so, consider couples' life insurance. The sooner you get coverage, the better.

You're likely to be healthier at this stage of life and less risky to insure. Life insurance rates go up as you grow up, so it makes sense to lock your rate in; senior life insurance tends to be pricier.

And term life insurance policies for young families can be quite affordable. In a recent survey, we found that while 77 per cent of Canadian parents have life insurance, many either have:

• Inadequate coverage (i.e. a group insurance plan through their employer)
• Unnecessary coverage (i.e. whole life insurance or life insurance policies on their child)

Bottom line: joint life insurance for couples

• It's essential to have a policy in place for you and your partner to protect your family financially if something happens.
• You and your spouse can choose to separate flexible life insurance policies or get joint life insurance coverage.
• You save 10 per cent on the first year of premiums when you and your partner apply together with PolicyMe (and free child coverage!).
• Joint life insurance insures two people's lives and pays out just one death benefit. While joint can be cheaper, couples get more flexibility from individual life insurance policies.

FAQ: More about joint life insurance, spousal life insurance and combined insurance

The prices listed in this article have been researched and fact-checked with both internal and external sources. Prices are based on publicly available rates.

Our sources:

ACCAP - Canadian life and Health Insurance Facts. CLHIA. (n.d.). http://clhia.uberflip.com/i/1478447-canadian-life-and-health-insurance-facts-2022-edition/3

Survey Reveals Parents' Biggest Life Insurance Mistakes. PolicyMe. McKay, Laura. https://www.policyme.com/blog/survey-reveals-parents-biggest-life-insurance-mistakes

WinQuote Canadian Products. WinQuote by Equisoft. https://www.winquote.net/