A typical question asked by couples is whether they have the option of taking out a single or a joint life insurance policy and which is best recommended. To help you better understand we have laid out some of the main differences below.
Pay-out on first death
The main reason couples are tempted by a joint policy is that it works out to be cheaper when compared to buying standard life insurance cover for individual and there is only one set of documents which have to be maintained.
However, with a joint policy, the pay-out is only on the first person passing away, after which point the cover ceases to exist. For example, presume you take out a £300,000 policy for 15 years with your partner and one of you should unfortunately pass away in the 10th year.
Then the insurance company will make the pay-out for the sum assured- £300,000-but the second person will no longer be insured, meaning the remaining partner will need to take out another policy which is likely to be much more expensive as they are now older, possibly in poorer health, and therefore a higher risk.
Pay-out on second death
In some cases it is also possible to arrange for the pay-out to happen on the second death, given that this is more unlikely the premiums are even lower for this type of policy. If we continue from the above example, then the payment of £300,000 will not be paid out by the insurance company unless the remaining partner also passed away within the term of the policy (15 years). As per above, there is only one-payout on this policy too, so it’s easy to see the clear disadvantage.
What’s more, there are other stringent conditions of the policy too such as in the event that the couple splits up, then the policy cannot split too. Also, if the other partner stops paying the premiums then the policy will cease.
Disadvantages of joint life cover:
Apart from single pay-out, one of the prime drawbacks in a joint life cover is that if the couple decides to split then the policy cannot be divided into two. If the split is not amicable and the couple does not maintain the same financial arrangement then it becomes difficult to continue with the policy. Moreover, if one of the two policyholders does not pay for their part of the premiums then the policy would lapse in such cases.
They can buy separate policies for each other but that may become difficult especially if they are ageing or has some or the other disease. In that case, the separate policy proves more expensive and eats away the benefits enjoyed during the joint life insurance.
What if you have children after buying a joint policy?
Well, if you have babies after purchasing a joint policy then you can convert it into a multiple life insurance policy. However, it depends on the insurance provider and your individual circumstances. So, check with your life cover provider.
A multiple life cover is again affordable than many individual policies especially when you start ageing or suffer from ill health. In later years, individual policies prove more expensive.
For a couple to take out a joint policy, they needn’t be married but generally in the household it works best if there is one sole breadwinner. Naturally, most families now rely on two incomes so perhaps it makes sense to get to two individual policies – which may be more expensive but both incomes are then secured in case the unfortunate should occur.
You can also customise the policy according to the age and health of each partner. However, this works best of you take two separate policies so as to get two pay-outs.
To add, you can customise the two policies such that one partner takes out a policy of £300,000 whilst the other takes out £200,000 or one has a term of 20 years whilst the other partner has a policy term of 25 years. The single policy effectively means that you can consider factors like age and state of health before you determine the policy term and the sum assured that is right for your circumstances.
How to purchase joint life insurance policy?
Well, you certainly need to shop around and check the quotes of various joint insurance providers and compare against the quotes of individual policies. Find the sum of the individual policies and compare against the total value of your joint family. If you find the comparison difficult then leverage our free, transparent and independent service, which gives accurate comparison of all UK life insurance providers. To know more, check our website https://freepricecompare.com/life-insurance/ or you can call our friendly team of insurance experts on 02034757476.
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