Joint vs single cover - which type of insurance policy is right for me?
If you are looking for a life insurance policy and you’re in a long-term relationship, one key question to address is whether to go for a single or joint policy.
There are a host of potential pros and cons to single and joint life insurance that you need to consider before applying for cover.
What’s the difference?
A single life insurance policy only covers one life, so if both members of the couple want cover then they will each need to take out their own policy.
The alternative is to go for a joint life insurance policy. Both lives are protected by the policy, with a payout generally made after the first partner dies during the term.
One factor for any couple to consider when arranging their cover is the cost.
There are all sorts of different factors that go into determining the cost of any life insurance policy, whether for an individual or a couple. These include the age of the applicants, their health history, the amount of cover they want and the term of their policy.
One selling point for a joint policy is that it is often cheaper than taking out two separate policies for the same level of cover. So if you are working to a tight household budget, a joint policy may be more affordable.
The way that payouts are handled is the big difference between joint and single policies.
Usually joint policies only pay out for the first death. So if a couple takes out a joint life insurance policy, and the husband dies, the wife receives the payout. However, this then leaves the wife without any life insurance cover.
If both partners have single life insurance policies, and they both die within the term of their policies, then any dependents will receive two separate payouts ‒ one after each death.
This is where the higher overall cost of having two separate life insurance policies may prove beneficial.
The surviving partner
Another issue to consider is the position of the surviving partner in a joint life insurance policy.
They may still want cover of their own, for example, to protect any children they have. However, they are likely to be older, which will inevitably have an impact on the cost of any new policy they look to take out.
So while a joint policy may be cheaper than two individual policies at the outset, a joint policy plus an individual policy taken out when one partner is older may not be quite so budget-friendly.
How much cover do I need?
Taking out separate policies also allows you to take a varied approach to the level of cover you have.
For example, one partner may be the main breadwinner in the household, while the other works part-time but takes on more of the family responsibilities. You could take out more substantial cover for the breadwinner, to replace their earnings should they pass away, than for the other partner.
This isn’t possible with a joint policy, where you can only set a single level of cover.
It’s also important to remember that just because one member of a couple may not work, that doesn’t mean they do not need life insurance.
Should a stay-at-home parent pass away, their partner would still see a financial impact, for example by working less or paying for additional childcare.
What happens next?
It’s also important to consider the future, and what it may hold for your relationship.
Should you break up, will you be able to split a joint policy into two single ones? Some insurers can do this, but it may mean a jump in your monthly payments.
But what if your insurer cannot do this? You may need to cancel the policy and take out separate life insurance policies to protect any children you may have, which may prove more costly as you will be older, and potentially less healthy.
A relationship break-up is unlikely to have any impact on your cover should you have separate life insurance policies.
So, should you take out single or joint life insurance?
While joint life insurance can be cheaper than taking out two individual policies, if you break up, it leaves one partner without cover. However, if both partners have separate life insurance policies, both parties remain covered regardless of their relationship status. So your decision really does depend on your personal situation.
John Fitzsimons has been writing about money for more than a decade, as editor of the B2B magazine Mortgage Solutions and then personal finance website loveMONEY. Since going freelance, he has written for the likes of the Sunday Times, Forbes, the Mirror, the Sun, and Moneywise.
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