- A first-to-die policy is a life insurance policy with two people named as insured individuals. Most life insurance policies just have one person insured under the contract. By combining two insurance contracts into one, you may end up saving money since you only have to pay for one death benefit, one policy fee, and one premium load on all premiums paid.
- The policy contract functions like any other life insurance policy, with one important feature: it policy pays a death benefit when the first person named on the policy dies. This means that if you and your spouse take out a first-to-die policy, and your spouse dies first, you get the death benefit of the policy. But, if you die first, your spouse receives the death benefit.
- This type of policy takes the uncertainty out of who will die first, and may prevent wasted premium dollars from being spent. Regardless of who dies first, the other spouse is taken care of. With two life insurance policies, there are two premium payments. If you die first, your spouse receives the money from your policy, but she still carries a policy with premiums that are due. If she cancels this policy, those premiums may be wasted if the policy has not built a significant cash value reserve that equals the premiums she's made.
- Before buying a first-to-die policy, you should analyze the difference between buying two policies and buying just the one. While you should save money with a first-to-die policy, you might not. Instances include times when you or your spouse has a serious medical condition or some other health issue which may prevent one of you from getting insurance, or may increase the premium on the policy significantly. The only way to know for sure is to get a quote for two separate policies and compare the total with a first-to-die policy.
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