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Joint last-to-die life insurance is a specialized form of permanent life insurance designed primarily for tax and legacy planning. While it isn’t right for everyone, it can be an extremely effective solution for couples who want to cover future taxes, preserve wealth, and leave a meaningful legacy to their heirs or favourite charities.
This guide explains how joint last-to-die—also known as second-to-die—life insurance works in Canada, who should consider it, how much coverage typically costs, and how it compares to other joint life insurance options.
- Key takeaways:
- In Canada, most assets can roll over to a surviving spouse on a tax-deferred basis, which is why taxes are typically triggered only on the second death.
- Joint last-to-die life insurance is commonly used to fund taxes on RRSPs or RRIFs, capital gains on non-registered investments and secondary properties such as cottages or rental properties.
- Permanent insurance such as whole life or universal life is generally required, as term life insurance may expire before a death benefit is needed for estate planning.
- Premiums and death benefits can be structured with flexibility, including options that reduce the financial burden on the surviving spouse while still preserving long-term legacy goals.
What Is Joint Last-to-Die Life Insurance?
Joint last-to-die life insurance is a permanent life insurance policy that covers two people—most commonly spouses or partners—and pays out only after both insured individuals have passed away.
Unlike individual life insurance or joint first-to-die policies, there is no payout when the first person dies. Instead, the death benefit is paid to beneficiaries after the second (last) death, making this type of policy particularly well-suited for funding taxes at death, leaving an inheritance to children or grandchildren, or charitable giving.
In Canada, joint last-to-die life insurance is most often structured as whole life or universal life, providing lifetime coverage with guaranteed premiums and death benefits. While term life insurance is more affordable, it does not align well with wealth transfer or estate planning needs because it is temporary and may expire before a death benefit is paid.
How Joint Last-to-Die Life Insurance Works
Here’s a simple breakdown of how these policies function:
- Two people are insured under a single policy
- Premiums are lower than buying two separate permanent policies
- No benefit is paid when the first insured person dies
- The full death benefit is paid tax-free after the second insured person’s death
Because most assets can roll over to a surviving spouse on a tax-deferred basis, taxes are generally only triggered on the second death. Since the payout from a joint last-to-die policy occurs at that same time, it aligns closely with when taxes owing on death and final expenses are actually due, making it a natural fit for long-term estate planning.
Joint Last-to-Die Life Insurance in Canada
In Canada, joint last-to-die life insurance is commonly used to help families manage the tax consequences that occur upon death.
When the second spouse passes away, several taxes may be triggered, including:
- Capital gains tax on non-registered investments and secondary properties such as cottages or rental real estate
- Income tax when RRSPs or RRIFs are included in income on the final tax return
- Capital gains tax on shares of a small business
It’s important to note that in Canada, capital gains on a principal residence are generally not taxable, but capital gains on secondary properties and other investments may still create a significant tax liability. Without proper planning, heirs may be forced to sell assets quickly to cover these taxes. A joint last-to-die policy can provide immediate liquidity to:
- Pay taxes owing on death
- Preserve family property
- Equalize inheritances among children
These policies are also protected by Assuris, which provides coverage if a Canadian life insurance company fails, adding an extra layer of security for long-term planning.
Who Should Consider Joint Last-to-Die Life Insurance?
Joint last-to-die life insurance is not designed for income replacement. Instead, it’s best suited for couples with long-term wealth transfer and estate planning goals.
You may want to consider this type of policy if you:
- Own significant non-registered investments
- Have substantial savings in an RRSP or RRIF
- Expect capital gains taxes at death
- Own a family cottage or rental property
- Want to efficiently transfer wealth to the next generation
- Are planning charitable donations at death
- Want to minimize the financial burden on your children
- Are considering implementing an insured annuity strategy as part of your retirement or estate plan
- Want to ensure long-term financial support for a permanently disabled child or dependent sibling
It is commonly used by:
- Married or common-law couples
- High-net-worth families
- Business owners
- Families focused on legacy planning
How Much Joint Last-to-Die Life Insurance Do You Need?
Determining how much joint last-to-die life insurance you need starts with estimating the final tax liability that will be triggered when the second spouse passes away.
A practical way to approach this is to look at the major assets that are fully or partially taxable at death:
First, estimate the value of registered assets such as RRSPs and RRIFs. When the second spouse dies, these accounts are typically included as income on the final tax return, which can result in a significant tax bill at the highest marginal tax rate.
Next, review non-registered investments. Capital gains tax may apply to investment portfolios, stocks, mutual funds, and ETFs held outside registered plans. Only a portion of the gain is taxable, but for long-term investors, this can still create a large liability.
You should also consider other capital properties, such as a rental property, vacation home, or family cottage. These assets are deemed disposed of at death, potentially triggering substantial capital gains if they were purchased at a much lower cost.
Once you have an estimate of the total taxes owing on death, many couples choose a life insurance amount that closely matches this figure so their heirs are not forced to liquidate assets.
It’s worth noting that whole life and universal life insurance policies can be designed with an increasing death benefit. This can be especially helpful if you expect your RRIF balance or other assets to grow over time, increasing the future tax liability.
Advantages of Joint Last-to-Die Life Insurance
1. Lower cost compared
Because the death benefit is only paid after the second death, insurers are able to price joint last-to-die policies more efficiently. For couples planning long-term, this often results in meaningful premium savings compared to buying two separate permanent life insurance policies.
2. Designed specifically for taxes owing on death
These policies align closely with when taxes are actually due—after the second spouse passes away. This makes them particularly effective for funding final tax obligations without disrupting the survivor’s lifestyle.
3. Tax-free liquidity at the right time
The death benefit is paid tax-free and can be used to cover final taxes, settle the estate, or preserve assets such as a family cottage or investment portfolio.
4. Payment flexibility to reduce survivor burden
Some joint last-to-die policies allow premiums to be paid only until the first death rather than continuing until the second death. This can significantly reduce the financial burden on the surviving spouse during retirement.
5. Supports long-term legacy planning
Joint last-to-die life insurance can help ensure that children, grandchildren, or charitable organizations receive the intended inheritance without assets being eroded by taxes.
Drawbacks of Joint Last-to-Die Life Insurance
1. No payout on the first death
Because there is no benefit paid when the first spouse dies, this type of policy is not appropriate for income replacement or immediate cash needs for the surviving spouse.
2. Long-term commitment
Permanent insurance requires consistent premium payments over many years. While premiums are predictable, couples must be comfortable with the long-term nature of the strategy.
3. Medical underwriting considerations
For fully underwritten policies, both individuals must qualify medically. Health issues with one spouse can affect pricing or eligibility.
4. Not suitable for every situation
Couples with minimal taxable assets or those primarily concerned with short-term protection may find other insurance strategies more appropriate.
How Much Does Joint Last-to-Die Life Insurance Cost?
Because the policy only pays after both insureds pass away, premiums are lower than purchasing two individual permanent policies with the same total coverage.
The cost of joint last-to-die life insurance varies depending on several factors, including:
- Age of both insured individuals
- Health status
- Amount of coverage
- Type of policy (whole life vs universal life)
- Premium structure (premiums end after first vs second death)
If premiums are structured to end after the first death rather than continuing until the second death, those premiums will be higher, primarily because the insurance company collects payments over a shorter period of time while still guaranteeing a lifetime benefit.
As a very rough guideline, younger and healthier couples may find joint last-to-die coverage to be one of the most cost-effective ways to fund future taxes owing on death. However, pricing can vary significantly, so a personalized quote is essential. The table below illustrates estimated monthly premiums for $500,000 of permanent life insurance for non-smoking applicants of average health:
| Age | Premiums paid to second death | Premiums paid to first death |
|---|---|---|
| 50 | $368 | $388 |
| 55 | $480 | $520 |
| 60 | $595 | $734 |
| 65 | $803 | $1,070 |
| 70 | $999 | $1,434 |
Joint Last-to-Die vs Joint First-to-Die Life Insurance
Joint first-to-die life insurance is another type of joint policy that insures two people but pays out on the first death. While both policies insure two people, they serve very different purposes.
| Feature | Joint last-to-die | Joint first-to-die |
|---|---|---|
| When benefit pays | After second death | After first death |
| Primary purpose | Estate & tax planning | Income replacement, debt pay off |
| Common policy types | Permanent, like whole life and universal life | Term life insurance |
| Typical beneficiaries | Children, estate, charitable organizations | Surviving spouse |
If your goal is to protect household income or pay off debts after one spouse dies, joint first-to-die is more appropriate. If your focus is estate preservation and tax efficiency, joint last-to-die is the better solution.
Frequently Asked Questions
No. Life insurance death benefits in Canada are generally paid out tax-free to beneficiaries.
Yes. Many families name a charity as the beneficiary or use the proceeds to fund charitable donations at death.
Once the policy is in force, coverage remains intact as long as premiums are paid, regardless of future health changes.
Yes. In Canada, common-law couples can apply for joint last-to-die life insurance. The policy structure and benefits are the same as for married couples.
Joint last-to-die life insurance can be extremely valuable when used correctly. If your primary concern is ensuring that taxes owing on death don’t erode the wealth you’ve built, this type of policy can provide certainty, liquidity, and peace of mind.
However, it should almost always be evaluated as part of a broader estate and financial plan. In many cases, it works best when coordinated with wills, trusts, and tax planning strategies.
Protecting Your Legacy With Joint Last-to-Die Life Insurance
Joint last-to-die life insurance can be a powerful planning tool for couples with significant assets and a clear understanding of the taxes that may be triggered on the second death. It is most effective when used to provide liquidity for RRSPs or RRIFs included in income at death, capital gains on non-registered investments or secondary properties, and other final tax obligations that could otherwise force the sale of family assets.
Key considerations include whether permanent coverage is appropriate for your goals, how much insurance is needed to match your estimated taxes owing on death, and how the policy should be structured—such as whether premiums continue until the second death or end after the first death to reduce the burden on the surviving spouse.
We offer comparisons with multiple Canadian insurance companies to help ensure you obtain the best coverage for your needs. Whether you are healthy, have medical conditions, or live a high-risk lifestyle, we work to match you with an insurance company and product that views you as a lower risk and can offer coverage at a fair price.
Our role doesn’t end once a policy is in place. We provide ongoing support to ensure your coverage continues to align with your changing financial situation, family needs, and long-term goals. We can also design a complete insurance solution that may include term and permanent life insurance, disability insurance, health and dental coverage, long-term care insurance, and critical illness insurance—helping protect you and your family against a wide range of risks.
For a free, no-obligation consultation, email info@briansoinsurance.com or call 604-928-1628. You can also use the form below to request a personalized quote delivered directly to your inbox.
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My wife and I have two last to die policies where the cash surrender value exceeds the annual premium. Can l use these funds to pay the premium? I am not interested in terminating the policy, I simply want use funds to finance the premiums as they come due.
Yes, you should be able to use the existing cash value inside your policy to pay for your premiums. Note that this amount may eventually run out and you will have to start paying the premium out of pocket again to keep the policy in force.
My husband and I currently have two term life policies which we would like to convert to a joint last to die policy. We are both retired and my husband will be 70 and I am 64. What are the advantages in making this change?
Hi Patricia. I’m not aware of any insurance company that can combine two separate term policies to a single JLTD policy. You should be able to convert them to individual permanent policies, but you should look into it soon since the conversion privilege usually expires between age 70-75, depending on the insurance company.
The advantages of conversion is twofold. First premiums will be level until age 100 so you don’t have to deal with sky high renewal rates. Second, you will have coverage that lasts a lifetime, since most term policies expire between age 80-85. You may even convert only a portion of it, depending on your need and estate plan.
We have last to die insurance. My premium is 6500 a year My insurance company tells I have to pay 6500 a year plus a cost each year tp take of my policy
Does that seem right to charge extra for taking care of my insurance?
Hi Jake,
It’s difficult to advise if I don’t know what the product is. Perhaps it is a whole life policy that depended on dividends to fund the premium. If the dividend is insufficient, then you have to pay more out of pocket to maintain the coverage. Otherwise, they may reduce the face amount.
If you can provide more information about the product, I may be able to help further.
Feel free to email me at info@briansoinsurance.com to discuss further.
Brian
If a client has a Joint and Last to Die and there is a marriage break up, can that policy be split between husband and wife? Both have children from other marriage and both want the policy. I am thinking they should divide the policy.
Hi Gary, you may be able to split the policy between husband and wife, but it depends on when you request the split. For example, some policies don’t allow splitting after the 5th policy anniversary or after 6 months after the marital separation. You should read the contract carefully to see if it allows splitting.
Hi, For the same policy, will the insurance premium payable stay the same in every province?
Hi Wee. Yes, the premium stays the same in every province.
My elderly parents have a joint last to die policy and the cash surrender value & closing balance are currently in a negative position. How does that impact the Benefit being paid out upon their death? Is the negative balance simply deducted from the Benefit payment? And how would it have gotten into a negative balance position – by missed premium payments?
Hi Jess. Is it a whole life or universal life policy? Have they made withdrawals from the policy? Or did they obtain a policy loan?