If you’re married or in a long term relationship, life insurance is a great way to give you peace of mind that your dependants will be financially stable in the event of your death. But should you take out a joint policy or two singles?
In a world where so much is done together as a couple, from joint bank accounts to joint mortgages, it seems like a simple decision to take out a joint life insurance policy too. However, this is not always the best option for everyone, so it’s vital to understand the benefits and drawbacks of joint and separate life insurance.
The first difference to mention is the price. Due to two separate policies offering a greater amount of cover, they are normally more expensive than a joint-life policy. But the difference can be very small, and it’s worth comparing prices for both options.
Secondly is the extent of the cover. If you have two separate policies, the insurance will pay out when either policyholder dies during the policy term then again when the second policyholder dies (so two payouts assuming the deaths are within the term of the policy). With a joint-life policy the payout is on the first death only. After this, the other policyholder will no longer be covered and may need to create a new life insurance policy. One aspect to consider with this is any medical problems since the original cover was set up, as this will increase the premiums further.
Another drawback with taking out a joint policy is the inability to divide the policy between you and your partner in the event that the relationship breaks down. If you and your partner decide to split, either one person will need to carry on paying into the policy ongoing, which will be significantly more than a single policy, or the policy will come to an end. There could also be issues as to who is entitled to the pay out from a joint policy, particularly if one of the partners remarries and has children with a new spouse.
Taking out two single policies gives you the flexibility to insure two separate people for two separate amounts. The main bread winner in your family may be insured for a greater sum than a stay-at-home parent, as the financial impact of the loss of income may be greater. That’s not to say that the stay-at-home parent will not have a financial impact. Who will look after your children in the event of your death? Don’t forget to take into account the extra childcare that may need to be budgeted for.
Having separate insurance policies can reassure you that the above issues do not occur and ensures that both you and your partner are adequately covered for the duration of your policy. It gives more freedom and flexibility to find the right policy for each individual person, and means your dependants won’t lose out in the event of a double loss.
Speak to a consultant today or get instant prices and compare how much you could save by taking out a joint policy.