Term Insurance Multi-life Policies vs. A Joint First-to-Die Plan

Generally, spouses who want to cover both them and their partner under one policy have the option of choosing a Multi-life Policy or a Joint First-to-Die Policy.

Multi-life Policies cover a husband and wife with what are essentially two individual life insurance policies, which happen to be under one policy number.

  • The advantage of this, over two individual policies, is that the family saves the annual policy fee, which ranges anywhere from $30 to $90 per year.
  • Multi-life policies still give the insured the same benefits as individual term life policies. For example, if one spouse passes away, the other spouse has the option to continue their coverage at the original pricing given at the original issue date.
  • Joint First-to-Die policies also cover both spouses under one policy, but the surviving spouse would lose his or her coverage after the death of the partner who was insured first.
  • Many of these policies do include a survivorship benefit, which stipulates that if the surviving spouse dies in the first 30 days, (the actual length of time varies by insurance company) the insurance company will pay out the death benefit. Many of these policies also allow the surviving spouse to convert, without evidence of insurability, to a new individual life policy within the 30-day period.
  • It should be noted that the conversion feature on these plans is based on the insured’s attained age, rather than the original issue age
  • The insurance company also has to offer the policy at the time of conversion, which means if the surviving spouse is in their 80s, a new policy may not be available.

For more details, you can contact us at 1-866-899-4849 or visit our Term Life Instant Quote Page.

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  • Ami Maishlish
    November 8, 2016 at 1:03 pm

    This comment refers specifically to situations where two persons (two “lives”) are to be life insured:

    There are several considerations to take into account:

    1. CBD (Combined Billing Discount): As described by the article’s first two points, this is a discount given by the insurance company to partially reflect the insurance company’s “saving” on its billing administration costs. The value of this discount relative to the total premium cost of the two policies on the lives of the two persons diminishes as the rate per $Thousand of insurance coverage increases.

    Unless the two lives to be insured are of the same gender, insurance age, etc. and unless the “type” and amount of coverage purchased on each of the persons’ lives is identical or nearly identical, it is in the purchasers’ best interests that the cost consideration take inter-company (real Multi-Life) into account along with the CBD considerations. The benefit from consideration of real Multi-Life that includes both inter-company and intra-company considerations, versus just the CBD where one is limited to intra-company considerations alone can amount to thousands of dollars in premium savings over the years.

    2. Spreading the risk. During the 1990s there was a large volume of hype – most of it largely baseless – about insurance company “ratings”. Insurance company “ratings”, plus about $5.50 are worth about as much as the price of a medium size latte at Starbucks or Aroma. Those “ratings” predict what the already known past will be and are at best snap-shots of history. One well known “rating” agency rated both Sovereign Life and Confederation Life (the two major Canadian life insurance companies that met their demise) as Good and Excellent shortly before their respective demise while it rated other companies that still exist or have merged into other companies with lesser “ratings”. While I am not a proponent of the theory, and going just by the numbers and the “ratings”, the Canadian experience with “ratings” of life insurance companies appears to suggest that the better the “rating” the greater the potential for the company with that great “rating” to fail.

    A good approach, and based on the very principle of “insurance” is to spread the risk wherever possible. This renders real Multi-Life, with its consideration of inter-company spreading of the risk to be of greater value than “putting both eggs in the same basket”.

    The challenge with real Multi-Life is that the insurance agent who is not equipped with market research software that is capable of handling real Multi-Life has to do more work to chart out real Multi-Life considerations manually, and that takes time.

    3. Another consideration – and an important one, particularly if the two lives are to be insured on a CBD basis on the same policy and same billing – is the potential of inadvertant lapse of coverage on both lives simultaneously. That can occur if a premium payment is missed (particularly when the insurance is “term”) and the “grace” period expires. The potential for that increases in a spousal or business partnership divorce if the premium payment is inadvertently or intentionally missed, as well as in the event of death of one of the persons (at which point there is the added potential for mistaken termination of the policy on the life of the survivor.

    4. On the other hand, I would be remiss if I didn’t mention an aspect in favour of the CBD format: A couple of life insurance companies in Canada currently offer “aggregation” discounts. In other words, these discounts add up the face amounts of the policies on each of the insureds under the CBD and calculate the premium on the basis of the aggregate face amount. That “aggregation” could result in additional savings. For example, if the coverage on each of the persons is $500,000, the total face amount on the two persons is $1,000,000. In many instances, the rate per $Thousand of life insurance is lower in the $1,000,000+ band than in the $500,000+ band. For CBD placed with one of these two insurers, this could potentially amount to enhanced savings that exceed the “policy fee reduction” savings. Research software capable of handling real Multi-Life, of course, also identifies such potential. Whether the agent opts to consider only CBD, and only for “policy fee” discounts, or to use advanced research software that includes real Multi-Life considerations – not just “policy fee: CBD – depends on how meticulous, knowledgeable and consumer interest focused the agent is.

    Note: To the best of my knowledge, no publicly available internet site providing “free” life insurance quotes includes real Multi-Life. For that, you will need to consult with a professional life insurance advisor who is also properly research equippped.

  • LSM Insurance
    March 28, 2011 at 4:27 pm

    Yes many Canadian insurance companies offer this option. Regards, LSM

  • Dalia
    March 28, 2011 at 4:18 pm

    I have a company that has 4 partners.
    They are inquiring whether there is a First to Die policy available on 4 partners?