Two Incomes, One Life Insurance Policy

Before the surge of two-income families, the insurance industry targeted husbands. Their widows, went the pitch, would need funds for the mortgage and children's education. "But now that both partners are wage-earners, it's important to guard against the loss of either income," says Ted Lietz, at Jackson National Life in Lansing, Mich.

Instead of a husband and wife buying separate policies naming each other as beneficiary, "first-to-die" coverage may be a less costly option. One policy covers both; if either dies, the other collects.

TWO FOR ONE. The idea works best when each spouse's income is equally vital to maintain the family's lifestyle. First-to-die insurance typically saves 10% to 25% of the cost of separate policies, because premiums are based on a hypothetical "joint equal age."

A typical case: One insurer charges a 55-year-old husband nearly $18,000 a year for his own $1 million whole-life contract. A similar policy for his wife, also 55, costs roughly $11,000. But one first-to-die policy runs about $24,000, a 17% savings. Another insurer will sell two 35-year-olds a $200,000 policy for $255 monthly, vs. $341 for separate policies.

Joint coverage isn't for everyone. An older husband might prefer to buy his own whole-life policy while his younger spouse gets low-cost term coverage. But there are plans to suit different needs. Nationwide sells "joint decreasing term" coverage that lets a couple's surviving member pay off any remaining mortgage sum. The "joint ultimate" policy of Jackson National and "multi-life" plan of Fidelity Union in Dallas let you build up invested funds for retirement if you surrender the policy. Life of Georgia's "joint whole life" plan "isn't only for a couple," says sales support director Carl Saunders. "It's Jim-dandy for buy-sell arrangements where two partners own a business. If one dies, the other has the proceeds to buy his share." Some policies cover several partners, with payouts pegged to each one's piece of the business.

Many also enable the survivor to do some estate planning. The policy can be converted to one that pays a matching death benefit to the heirs of the second-to-die.

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