The following question is about which type of term life insurance to buy:
We are a married couple (30 & 25 years old) expecting our first child in June. I have mortgage insurance for about $170K. Now we are looking to purchase a term-insurance policy of around $500K. My question is what do you think of joint first-to-die policies. These policies are cheaper compared to purchasing two term policies.
Congratulations on your baby and I hope everything goes well. One of the reasons I love writing this blog is that I am learning new things all the time. For example, I did not know that couples can purchase a term life policy, which pays out when the first of the two policyholders die. According to this article, the premiums on a joint first-to-die policy are about 15% cheaper than two single policies offering the same coverage.
One drawback I can think of with joint first-to-die policy is that if both of you were to die, the benefit amount would be the same as one of you passing away. If both of you are working and something were to happen to one of you, the other would likely manage just fine after an initial period of mourning. In the worst-case scenario (both of you dying) though, your child would need financial support for more than twenty years and for about 15% more in premiums, you could purchase two policies that would double the coverage. In any case, I am not an expert on this topic and I welcome comments from our readers.
