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This is probably a stupid idea ...

My wife and I both make decent salaries. We believe that either of us could raise our child on a single income if the other passed away. If both of us passed away, our current assets would not provide for our child. In that respect, we don't need what I will call typical term life insurance, but instead only need life insurance that will pay out when we both die (assuming we die within the term). This seems like it would change the risks of the insurance company and should result in a cheaper premium.

Does this product exist? If so what is it called?

If it does not exist, why not?

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    I would consider the possibility that an event which kills one of you could leave the other one unable to work (e.g. a car accident), or that the surviving spouse could lose their salary for unrelated reasons without passing away (fired, or medical issues make it impossible to work, etc). Ordinary life insurance would help provide a buffer against these scenarios as well.
    – Chris Hayes
    Mar 14, 2019 at 5:07
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    Insurance on one person still leads to a payoff if you both die.
    – JPhi1618
    Mar 14, 2019 at 15:17
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    @JPhi1618 sure, but the odds of us both dyeing is lower, so it should be cheaper to only pay out if we both die.
    – StrongBad
    Mar 14, 2019 at 15:49
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    @ChrisHayes: crashnotaccident.com
    – whatsisname
    Mar 14, 2019 at 20:37
  • Many things could render the other person unable to work if their spouse dies which you probably don't consider while you both are healthy, handicap, depression et.c.
    – mathreadler
    Mar 15, 2019 at 7:55

6 Answers 6

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https://www.investopedia.com/terms/s/secondtodieinsurance.asp

What is Second-To-Die Insurance

Second-to-die insurance is a type of life insurance on two people (usually married) that provides benefits to the beneficiaries only after the last surviving person on the policy dies. This differs from regular life insurance in that the surviving partner doesn't receive any benefits after the spouse dies. Thus, second-to-die insurance is used for estate planning

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    According to this company The two most common types of survivorship life insurance are Universal Life and Whole Life insurance. Term life insurance, being only temporary coverage, doesn’t make sense for this type of coverage (as evidenced by the fact that, at the date of this writing, only one company offers such a product). By the time we retire, and hopefully well before then, we will have enough savings to support our child if we pass away so we are only looking for term insurance and not whole life.
    – StrongBad
    Mar 13, 2019 at 22:12
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    @StrongBad "The two most common types of survivorship life insurance are (UL) and (WL) insurance." Contrary to popular opinion, the phrase "most common" does not mean "only".
    – RonJohn
    Mar 14, 2019 at 8:06
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    @RonJohn "only one company offers such a product" - so the OP knew that it exists, but if only one company offers it, there obviously isn't much competition.
    – Martin Bonner supports Monica
    Mar 15, 2019 at 15:04
  • @RonJohn - I retract my edit request. The nature of the question, "please define a term" lends itself exactly to what you cited. i.e. a brief attributed citation. Carry on...
    – JTP - Apologise to Monica ♦
    Mar 17, 2019 at 15:37
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The product is called "second to die," as mentioned in RonJohn’s answer, or "survivorship life," as you saw. I think you’ll find that the premiums for 2nd to die aren’t enough cheaper to make it the right choice for you. Especially considering that you would either continue to pay the premium after the first spouse dies or pay a higher initial premium if a rider is available to waive the premiums after the first death.

Probably your best option, especially if you are focused on term insurance, is to choose an amount that would provide for your dependents and split that amount of term insurance between the two of you. This offers a few benefits:

  • The premium after the first death would be smaller and could be dropped entirely if the insurance needs are covered by savings up to that future date and the proceeds of the first policy.
  • If you considered the impact of one spouse's death upon the other's ability to reach education, retirement, or other goals, you’d probably find there was at least some need that the smaller amounts of separate term insurance could cover. Your ability to save for those goals would likely be reduced on the death of one of you.
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    If your plans involve "term life" and "dropping the insurance before the end of the term", you are making a bad plan. Term life almost always has a fixed price per unit time, and your payments early on are way over price, and your payments later on are way cheaper, than they would be. Insurance companies make bank by relying on people dropping a term life policy before it matures.
    – Yakk
    Mar 14, 2019 at 15:07
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    @Yakk Do you have an alterantive suggestion? With renewable term life, you keep it until you are no longer in need of it. Since you can't know for sure when that is, the idea is to lock in a low rate so that you can continue to afford it if your situation changes.
    – JimmyJames
    Mar 14, 2019 at 17:19
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    @JimmyJames Get a fixed term life. Make and execute a savings plan, starting now, to stuff money away for after the term ends, using usual techniques. Do not plan to cancel the term life before it ends. If someone is offering you a renewable term with actually low rates on the renew indefinitely, that is whole life dressed up as a term life. If they aren't, then the renew terms are going to be bad enough to handle the lemon problem and/or have other exclusions that make it less than useful, so you shouldn't plan on resubscribing. In either case, get term life.
    – Yakk
    Mar 14, 2019 at 17:55
  • @JimmyJames (Note that a whole life policy could be part of your plan for after the term life ends, but it isn't a replacement for the purpose of term life.)
    – Yakk
    Mar 14, 2019 at 17:56
  • @Yakk note that the OP indicates that his household income is well over pay-check to pay-check. Insurance policies provide protection against short-term disasters in exchange for long-term capital loss; so, if for he has a 300k 30yr term policy, and he saves up 300k in the next 5yrs, then dropping his term policy at that point would free up additional revenue to grow his investments faster. At this point his premiums allocation of funds would create capital gains instead resulting in a better retirement fund while still protecting his family's future. So, in this case, it can be a good move.
    – Nosajimiki
    Mar 14, 2019 at 19:04
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I'm going to frame challenge and say:

Even though it exists, don't do it

Get a regular 20 year term policy on each of you. There are several things you aren't considering. As others have said, what if one of you survives the car crash but the other is seriously injured and unable to work for a long time? What if one of you is in a car crash with your child and dies but your child survives and has major injuries requiring constant care for months or years afterwards? Even if nothing major like that happens, wouldn't you want to know that your spouse is in very good shape financially in the event of your death? She could pay off the house instantly and have a major stress gone from her life at a time when a lot of other stress has been added.

The $25 a month is worth it.

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  • Carrying enough disability insurance to protect against the worse case scenerio of the 3 of us becoming disabled and requiring long term medical care is going to cost significantly more than $25 a month.
    – StrongBad
    Mar 15, 2019 at 12:50
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    @StrongBad that is a completely different question. You were asking about life insurance, not disability insurance.
    – Kevin
    Mar 15, 2019 at 12:58
  • Apparently I don't understand your answer as I thought the scenarios you are talking about would be covered under disability insurance.
    – StrongBad
    Mar 15, 2019 at 17:41
  • Your child becoming disabled and requiring full-time care would not be covered by disability insurance on you. You becoming disabled while still needing to care for your child would be covered by disability insurance, but would still be a situation where have a good deal of extra money would be extremely helpful.
    – Kevin
    Mar 15, 2019 at 17:56
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As other's have mentioned in some jurisdictions this type of product is called second to die insurance. Alternatively it is called a Joint Life Second Death (JLSD) policy.

The premium for such a product will typically be smaller than a Single Life policy or a Joint Life First Death (JLFD) policy of the same duration, but it depends on how your insurance company structures the premium.

Typically these types of polices are taken out as Whole of Life (WoL or WL) policies (at least where I am located UL (Universal Life) is not a product sold on the market). Whether or not a term or WoL product is more appropriate for you is something you would need to consider.

You may also want to take out accident insurance or Permanent Disability Insurance (TPD) to mitigate against the situation where one of you survives but can't provide for your children.

You can also take out a policy that pays out twice, once for each life. These types of policy are called Dual Life (typically). They should (in general) be equivalent to a JLFD policy and a JLSD policy added together (though two separate policies may be slightly higher due to having to account for setting up two policies instead of one).

It is also possible to get deferred versions of these polices, which defer the start date of the policy to some point in the future.

Finally, you can get Unit Linked (investment style policies) and With Profits (aggregated investment type policies) which can augment the payout (but carry some investment risk as well).

As with anything potentially this complicated it is worth getting professional financial advice on.

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    "You can get Unit Linked and With Profits policies" - you can indeed, and insurance companies sell them because they make good profits for the insurance company, but not for the buyer. Rule 1 of buying insurance: never mix insurance and investment!
    – alephzero
    Mar 14, 2019 at 14:11
  • @alephzero it really depends on when you buy them (and what jurisdiction you are in) for that sort of statement to hold. It also depends on the specifics of the policy.
    – illustro
    Mar 14, 2019 at 14:14
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    Also insurance companies sell all of their products because they make good profits for the insurance companies! So I don't see that as a particular criticism of Unit Linked or With Profits policies.
    – illustro
    Mar 14, 2019 at 14:15
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Now that you know the policy you seek does exist, the best advice I can give you is to shop around a bit. If the amount of total insurance you want upon both of your deaths is X, then you should get quotes for:

  1. Term policy for X on just your wife.
  2. Term policy for X on just you.
  3. Term policy for X/2 on both of you. (Or any other division that makes sense.)
  4. Term policy for X on second-to-die for both. (It looks like term joint policies do exist, though I suspect not all companies offer them.)

All of the above will accomplish your goal.

My guess is that #3 will be more expensive than either 1 or 2 and will be quickly ruled out. I agree with you that 4 should be cheaper than the other options, and maybe it will be for companies that offer that type of policy. But it's also entirely possible that another company that doesn't offer joint policies has a better price on 1 or 2 than the best joint policy you can find, so obtaining multiple quotes from different companies is key. I believe the price of second-to-die policies will be highly dependent on the price differential between 1 and 2. For example, if one of you is much more likely to die sooner than the other (due to age, health, or occupation), than it makes sense that the second-to-die policy may be pretty close to the same price as that of the healthier individual policy.

Please don't hesitate to report back your findings. It would be interesting to see what the discount on second-to-die policies is in your case.

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Personally I believe you both need a policy incase on passes away and the other cannot work due to some sort of disability. The policy I would get would be a term T100 to cover final burial costs and potential probate fees with a term rider to cover living expenses and debt for the child. I would put a second term rider to cover the surviving parent with funds to.cover living expenses until age 80. Now the terms would depend on survivor and child's age. It's amount of insurance would also take into account potential growth if invested conservatively with withdrawals to cover needs. Also inflation factor should be taken into account

Complex yes but that's what your financial advisor is for. He/she gets paid well to figure this out for you.

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