The typical life insurance contract is written on the life of one person and is technically known as single-life insurance. A contract can be written on more than one life, however, in which event it is known as a joint-life contract, also called a first-to-die joint-life policy. Strictly speaking, a joint-life contract is one written on the lives of two or more persons and payable upon the death of the first person to die. If the face amount is payable upon the death of the last of two or more lives insured under a single contract, it is called either a survivorship policy or a second-to-die policy. Such policies have become quite popular as a means of funding federal estate taxes of wealthy couples whose wills make maximum use of tax deferral at the first death. Joint-life policies are fairly common for funding business buy-sell agreements.

The joint-life policy may cover from two to 12 lives, but because of expense and other practical obstacles, most companies limit the number to three or four lives. (Theoretically there is no limit on the number of lives that can be insured under a joint contract. A few insurers will issue policies on more than 12 lives if they all have related business interests.) The contract is most often written on the whole life plan, either ordinary life, limited-payment or universal life. It is seldom written on the term plan since separate term policies on each life for the same amount would cost little more than a joint policy and would offer the advantage of continued protection to the survivor or survivors.

The premium for a joint-life policy is somewhat greater than the combined premiums on separate policies providing an equivalent amount of insurance. In other words, the premium for a $200,000 joint-life policy covering two lives is larger than the sum of the premiums on two separate contracts providing $100,000 each. This is because only $100,000 is payable upon the death of the first of the two insureds to die with separate policies, while $200,000 is payable under a joint-life policy. Moreover, since two lives are covered, the cost of insurance is relatively high, and cash values are relatively low. However, a joint-life policy costs less than two separate policies providing $200,000 each.

The provisions of the joint-life contract closely follow those of the single-life contract. The clause allowing conversion to other policy forms differs in that it allows conversion policies on separate lives as follows: (1) conversion to single-life policies on the same plan as that of the joint policies upon divorce or dissolution of business, (2) division of the amount of insurance among the insured lives either equally or unequally, and (3) dating of the new policies as of the original date of issue of the joint policy.

Business partners sometimes take out a joint policy covering the lives of all partners and written for an amount equal to the largest interest involved. Upon the death of the first partner, the surviving partners receive funds with which to purchase the deceased�s partnership interest. Stockholders in a closely held corporation may follow the same practice. Since the insurance usually terminates upon the first death of the partners or stockholders, the remaining members of the firm will not only be without insurance but�of greater consequence�may also be uninsurable.

Some life insurers have introduced joint-life policies that are designed specifically for business buy-sell funding. Some of them offer a short period of extended coverage for the surviving partners or shareholders and guarantee their insurability under a new joint-life policy similar to the previous one. A few insurers have even introduced joint-life policies that allow allocations of unequal amounts of death proceeds to match actual unequal ownership interests.

A joint-life policy may be suitable for a husband and wife when the death of either will create a need for funds, as would be true if death taxes were involved. Even here, dissatisfaction sometimes arises when the survivor faces the fact that he or she no longer has any coverage under the contract.