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Joint life insurance policy... who gets the money?

Received this question from a reader and felt it was worth posting as a Q & A for other readers…

Q

My question is, if both die at the same time, what happens? I’ve been shopping around for a life policy for me and hubby and we could not decide if we should get one each, or a joint one. I don’t know if there is a payout if both die. If the answer is yes, does the payout go to the estate? And what if if both die and no ones knows this policy exists? Thanks

A

If you have a joint policy and both of you die, then the policy pays on BOTH lives. This is the case if one person dies before the other (as is normally the case) or if both die at the same time (as sometimes happens in an accident).

Who does the payout go to? The simple answer is “…whoever are named as beneficiaries in the policy”. (Note that under some policies the beneficiary is defined as the owner(s) of the policy so you may not necessarily see the term ‘beneficiary’.)

Example… lets suppose John and Mary have bought a joint policy.

Mary may be named as the beneficiary in the event of John’s death and lets say John is the beneficiary in the event of Mary’s death.

If Mary and John die together, then there are two payouts. The payout on John’s life goes to Mary’s estate and the payout on Mary’s life would be paid to John’s estate.

If John dies first, Mary receives a payout. If Mary dies first, John receives a payout.

But what happens after John dies and Mary receives a payout?

Mary has a decision to make… to keep the policy going or not. If she continues to keep it going she must continue to make the payments and (since John is dead) she should nominate a new beneficiary… maybe a child? This should be a simple administrative matter.

The problem with a joint policy that we identified in an earlier blog post is where the parties separate or divorce. Splitting the policy can become a real problem because all owners of the policy must agree….

... and getting a joint life policy is easy

The great thing is that you can apply online without having to fill out loads of forms, and at a time that suits you. And you can get a no-obligation quote right now.

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