What is First to Die Life Insurance?

March 10, 2020
Jonathan Fritz
B.A. Risk Management
Life Insurance Agent
First to die life insurance is a type of joint life insurance policy designed for married couples that pays out the benefit amount when the first spouse dies. First to die life insurance policies are an option for couples who share their finances. When you have a first to die policy, it covers both you and your spouse.

The surviving spouse will receive the benefit payout after the spouse's death and can use them as income replacement or to cover any expenses. The policy ends when the first spouse dies, and the funds are received. This means the remaining spouse will need to apply for a new policy if they'd like their own coverage.

When it comes to shopping for a life insurance policy, there is a lot to consider. If you're married, you might be looking into coverage for both you and your spouse on a single policy. First to die life insurance is another option to consider along with traditional joint life insurance. Both options have benefits and drawbacks, but depending on your situation, one could be the right solution for your family.

What are the Benefits of First to Die Life Insurance?

First to die life insurance can offer peace of mind to couples who both contribute to household finances. In homes where both spouses work, losing one of those incomes could cause significant financial stress. A first to die policy allows you to replace that lost income if one spouse passes away. The payout can also be used to cover funeral expenses, medical bills, and any debts your spouse may have had.

First to die policies are also popular with couples because they are generally less expensive than taking out two separate policies. If you and your spouse are a similar age and both healthy, your premium for a first to die plan might be much cheaper than two individual plans.

Are There Disadvantages of First to Die Life Insurance?

While first to die policies make sense for many couples, there are some drawbacks to be aware of before buying one of these policies.

  • The surviving spouse will need to purchase a new policy — Since first to die policies end when one spouse dies, the surviving spouse will be left without a life insurance policy. They'll need to purchase a new policy to cover their children and family in the event of their death. Additionally, life insurance premiums tend to be more expensive when you're older. This can make obtaining a new policy a financial burden.
  • First to die policies tend to be more expensive than joint policies — Generally, first to die policies have slightly higher premiums than traditional joint policies. First to die policies are considered higher risk for the insurance companies because the payout occurs when one spouse dies instead of waiting until both do.

What Happens to a First to Die Policy if a Couple Separates?

It can be difficult to split an insurance policy if you and your spouse divorce. Some companies will offer a rider that can amend your coverage and split it into two different policies if you and your spouse separate. There might be additional costs associated with this, but it will likely make things much easier if there is a divorce.

First to Die Life Insurance Vs Second to Die Life Insurance

Both first to die and second to die (traditional joint life insurance policies) are geared toward married couples, but they are structured very differently. A joint life insurance policy covers both spouses, but no benefit is paid out until both parties have passed away. You might see traditional joint life insurance policies referred to as "second to die" policies. This means that when one spouse dies, no money will be paid out. Plus, the surviving spouse will still need to make payments on the policy.

Joint life insurance policies are a smart way to cover children and other family members. However, they may not be the best solution if you and your spouse rely on one another financially. In general, these policies make the most sense when:

  • First to die life insurance — First to die policies are an option for couples who both work and contribute to the household. They commonly used for income replacement.
  • Second to die life insurance — If your spouse will not need any money upon your passing but you want to preserve your estate when he or she passes, a joint life insurance policy can make sense. These policies are an option for high net worth couples who want to preserve their estate, or family business owners who do not want to have to liquidate their business when both spouses have passed.

First to Die Life Insurance Vs Two Individual Policies

Having a single policy to cover both spouses is a common solution for many people's insurance needs, but it's not right in every case. Sometimes, it might be a better financial choice to have two policies. If one of you and your spouse are much healthier than the other, you'll likely qualify for very different insurance rates. The difference could be significant enough that it's cheaper to have two individual policies.

Your incomes are another consideration. For example, you might want to have two separate policies if you and your spouse both contribute to the household but make very different salaries. In general, you should buy a policy with a value of around 10 years of your income. So, if you make $30,000 dollars, you'll want to purchase $300,000 in life insurance, and if your spouse makes $70,000, they'll want to purchase $700,000 worth of coverage. In this example, you and your spouse might save money by having two separate policies.

It's important to shop around, no matter what type of coverage you end up buying. You'll need to look at all your options before you decide what's best for you and your family. First to die policies can be an excellent choice for married couples with joint finances, but they're not the right for everyone. Your life insurance policy is an important financial safeguard for your family, and making the right decision is important. If you are ready to start looking for a policy, you can compare rates using our free tool.