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Can Couples Get a Better Deal On Coverage?

November 25, 2016
Our goal is to educate and advise on life insurance options, so you can feel confident in making the right choice, whether that’s through Quotacy or somewhere else. To ensure we provide accurate and trustworthy information, our writers follow strict editorial standards.

Buying in bulk is almost always a great way to get a lower price on something, thanks to the way that most products are produced. “Buy one get one” deals are everywhere in supermarkets and stores, but is life insurance the same way?

Can I save money if both my partner and I buy from the same insurance company?

No. If you and your partner both need life insurance, it’s not any cheaper to buy at the same time nor is it cheaper to both buy from the same insurance company. In fact, you may actually pay more if you both go with the same insurance company depending on your individual risk factors.

For example, let’s say a husband and wife are each applying for a term life insurance policy and both go with Banner Life insurance company. However, the husband has a small private plane and occasionally he and his wife take short getaway trips. Principal Financial Group is the best insurance company we have for private pilots. By staying with Banner Life, he would actually pay more than if he would instead apply to a different company than the one his wife is applying to.

(Don’t worry, you don’t have to know which insurance companies are best for specific health or lifestyle factors. Quotacy does that research for you.)

Can two people apply for a cheaper “two-for-one” policy, so that when either one dies, the other would get the payout?

Some carriers do offer two-person policies that pay out whenever one applicant dies (often called a “First-To-Die” policy), but they are always more expensive than buying two separate policies, primarily because of the way that insurance carriers calculate the price of a policy.

The Price of a First-To-Die Plan

You see, when a person applies for a regular term life insurance policy, the price of the policy is determined based on the factors that make that person more likely to die and riskier to insure. It’s determined on an individual basis, and your price is affected only by your own health and lifestyle conditions. In a first-to-die plan, on the other hand, any health and lifestyle risks from one applicant are marked as risks for the entire policy.

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Consider a husband and wife. Bill is a 38-year-old male, Grace is a 38-year-old female, and they’re both applying for the same amount of coverage. Both are fairly healthy, but each carries a few risk factors. Bill is a veteran rock climber, and spends his vacations scaling cliffs. Grace plays it a little safer, but her father died of heart disease a few years ago, so she has a heightened insurance risk due to her family history.

If they were to apply for two separate policies, insurance carriers would see both of their applications like the graphic below. Since men are statistically more likely to die earlier than women, a male applicant will always have a slightly higher cost than an equal female applicant. After the base cost, the risks are factored into the cost of the policy, with each risk factor raising the price of the person it came fromThis graphic shows how prices are set. each risk class is stacked on the basic policy cost, like blocks.To calculate the price of a first to die policy, insurance carriers combine the risks for both applicants, since they’ll have to pay out if either one of the applicants dies during its duration. This means that they need to apply a risk class to both applicants as a unit, not just the individuals. For Bill and Grace, the carrier would start by taking the base price for covering two people, and applying every additional risk class to both of them, since the policy needs to pay out if either applicant dies.A First-to-Die plan applies risk classes across both people. Theylengthen the stacked blocks to cover both people's basic costs.Since the policy needs to cover two people, the odds that one of the applicants dies and the policy needs to pay out are doubled – even before the risk factors are applied. This raises the price of a first-to-die plan drastically.The final prices of these types of plans can be visualized by these blocks. First-to-die policies will always cost more than two normal term policies.Due to this immense price difference, first-to-die plans have fallen out of vogue, and some carriers don’t actually offer these plans anymore. Some other companies still offer a dual plan for life insurance, but those are generally much more expensive than two individual plans.

Long story short, if you’re looking to get another person insured with us, we recommend getting separate quotes at Quotacy to see what the cheapest price would be for both applicants individually, and then applying for policies individually to get coverage. It’ll offer you the same coverage, with a lot less stress on your bank account.

Watch the Can Couples Save Money on Life Insurance Video

1 Comment

  1. Joanne Mahoney

    Love the graphics. I work in Life Insurance as well; and even though we don’t write too many First to Die policies, the explanation about the risk factors and how the affect the cost of the policy is well written.


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