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Joint life insurance or 2 single policies?

21st March 2019

Are you a mum, starting to think about the people that you will leave behind after you are gone?

If so, you will probably want to explore the different life insurance options, to ensure you secure the best deal.  (As I committed to in my small goals post from earlier this month!) If you are in a long term relationship or are married, you may want to consider a joint life insurance policy rather than single coverage. A joint policy provides certain benefits, but is it the right option for you?…

What is a joint life insurance policy?

As the name suggests, joint life insurance covers two people simultaneously and will usually be provided on a first death agreement. It will be paid out if one of the individuals holding the policy dies during the predetermined term period. It is important to be aware that despite being a joint policy, this type of coverage will only ever payout once. With a first death agreement, the payout will occur after whichever partner dies first. For a second death agreement, it will pay out after both parties have passed on. After the payout has been completed, the policy cover then expires.

Terms and conditions

While many people think you need to be married or part of a traditional household in order to take out joint life insurance, this is not the case. Instead, it is suitable for anyone in a significant long-term relationship. Applications are easy to fill out and you can often complete the full application process online. It is however advised that you compare a number of different policy quotes before settling on the right choice, as prices vary.

 Considerations you should be aware of

When you are looking at joint life insurance policies, you should first consider the cost. You will usually find that it is cheaper to get a joint life insurance policy compared with two individual policies. The reason for this should be clear; with two singles you get two lump sum payouts, rather than one, regardless of who dies. For instance, a single life insurance monthly cost could be Β£6.15, whereas for joint life insurance you could be paying Β£10.88. Be aware also that the cost will rise as you get older, so if you need a new life insurance policy later on you will pay more. You should also look at the level of cover a policy like this provides. For instance, one member of the partnership could earn significantly more than the other. If that’s the case two singles could be less beneficial because one of the life policies may pay out very little. When a payout is provided in the event of you or your partner’s death, this will be added to your estate. Alternatively, you can set it up so that it is put directly into a trust for a named beneficiary, avoiding 40% inheritance tax.

Handling a break-up or divorce

You might be wondering what happens to your joint life insurance policy if your relationship ends. While you can apply for a new policy later on this can be quite expensive, time-consuming and complicated. However, it is possible to change a joint policy to two single options. With two single options, each partner will gain the chance to choose their own life insurance policy. They’ll be able to select their own dependants as well.

 That said, there is an important consideration here.

When you are applying for a new policy later in life, you probably won’t get the same deal. You’ll be older, you may have developed health issues or there could be other changes to your personal life. This is all going to change your policy, so ideally, you want to keep the one you previously held. That’s why you should think long and hard before choosing a joint policy.

Alternative options?

The alternative choice would be a single policy or no coverage at all. With no coverage at all, the benefit is simple; you won’t have to pay anything towards your life insurance, but there is a massive issue and that’s your dependants. You could easily pass on and leave them with nothing. If you die sooner than expected, then you could leave your children and family in serious financial trouble. Don’t forget policies like this can help pay for everything from clearing the mortgage to medical bills to funeral expenses. Without a life insurance policy, everything must come out of their own pocket. The main benefit of single policies is that if the relationship does ultimately fail then both policies remain. This saves the hassle of needing to look at the terms and conditions as you try and decide how to move forward. That said, you may find that a joint policy is actually significantly cheaper than two separate policies in a partnership. This could be because only one lump sum is paid if both partners pass on at the same time. With two single life policies, your dependents will receive two sums. If one partner dies, the partner who lives on will also no longer have a life insurance policy with a joint coverage.

In summary

We hope this helps you determine which coverage choice will be right for you. While you can certainly save money with a joint policy, ultimately, this will not be beneficial if coverage required for each individual partner is completely different. There are also a variety of disadvantages to this coverage that must be considered carefully before you proceed. Don’t be blinded by the lower overall premium when two singles may be more beneficial to you and your partner. The most important thing as a mum is making sure our loved ones are financially protected whatever the future may hold.

From just 20p-a-day it is possible to enjoy this reassuring peace of mind.

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