This is a contributed post
Life insurance can be a hard thing to get your head around.
No one wants to think about what will happen when they’re no longer around, but it’s something we all need to consider. The question is whether to got for joint life insurance or two single policies? We understand that it is important for both partners to have some sort of cover to protect one another, as well as any children.
But what is the best road to go down? Should each partner take out an individual policy? Or is joint life insurance a better option?
This article is written in collaboration with award-winning life insurance broker, Reassured, who can shed some light on all things life insurance.
This is a standard life insurance policy that will only cover one person
If you and your partner are looking at getting cover, you will both need to fill out separate application forms. You will have two separate contracts and will both need to pay separate premiums each month. In the event of passing away during the term, each partner will have a lump sum paid out.
There are 4 main types of life insurance policy that you can take out. Let’s quickly go through these;
Level term life insurance
This is where your payout amount stays fixed throughout the lifetime of your policy, so no matter when you pass away your loved ones will receive the same amount.
For example, if your sum assured was £200,000 this amount will stay the same throughout your policy and this is the amount that will be paid out after you have passed away. Your cover will protect you for a specific length of time (the term), this can be up to 40 years. If you don’t pass away before the end of the term, the policy expires and no pay out is made.
Your premium will be based on the level of risk you pose to the insurer. It will take into consideration information such as your age, whether you smoke, as well as your health and well being.
Decreasing term life insurance
With decreasing term life insurance, your pay out amount will decrease over time. This means that the further into your policy you get, the smaller the pay out will be upon passing away. Like with level term, your policy will cover you for a specific length of time (up to 40 years). If you don’t pass away before the end of the term, your policy expires and no pay out is made. Once again your premium will be based on factors such as age, health, smoking status etc.
This type of insurance is ideal for for covering the repayment of a mortgage, or another debt where the amount paid back will decrease over time.
Whole of life insurance
Like the name suggests, this type of cover will last for the rest of your life.
This ensures that a payout will be made upon passing away. Your payout amount will remain fixed so whenever you pass away, your loved ones will receive the same amount. This type of cover is best for covering fixed costs such as inheritance, living costs or even your funeral.
Over 50s plan
All UK residents aged 50 – 85 are guaranteed acceptance to an over 50s plan.
The cover you receive will last for the rest of your life and the pay out amount is fixed. Your premium will be calculated on your age, smoking status and the sum payable. Unlike all other types of insurance, no medical information is required. This type of insurance is best suited to the elderly who struggle to get life insurance cover due to their age or health problems.
What type of cover do I need?
When choosing the type of cover that’s best for you, you will need to consider all the things that will need to be taken care upon you passing away. This sounds a bit morbid, I know, but you won’t know what you need to cover unless you do this.
You might want to ensure that your husband and children would be financially stable in the event of your death, and to make sure that their living costs, as well as child care costs, would be taken care of and that there would be no financial worry. If you have a mortgage, or any other outstanding debts to pay, this would also need to be taken into consideration, and you can’t forget the spiralling cost of funerals.
Once you’ve got an idea of all of this, the type of cover you require will become a bit clearer. Or, if you’re still unsure, Reassured can find all the information you need and find quotes to get you the best cover that meets all of your needs.
Joint life insurance
Joint life insurance is a policy that covers two policyholders simultaneously. All of the above mentioned types of cover, other than an over 50s plan, can be taken out as a joint policy. On average this can save you 25% compared to two single policies as there is only one contract and one premium to be paid each month.
With joint life insurance you will only need to make one application. Just like with individual policies, your quote will be based on how much of a risk you will be to insure. The main thing to bear in mind with joint life insurance cover is that there will only be one pay out. This will usually be in the event of the first death but arrangements can be made for a survivorshop payout instead. Once the payout has been made the policy will expire. This means that the surviving partner will be left without cover and will need to sort a new policy for themselves for the remainder of their life.
What’s better, joint or individual?
Like with everything, there are pros and cons to both joint life insurance and single policies. The main benefit of joint life insurance is that you will be able to save some money (about 25% compared to two single policies) as you are only paying for one policy to cover two people. If you’re just looking for some form of cover and affordability is your top priority, this could be a good option for you.
You can also save money on any life insurance policy by following the these simple steps:
- Compare quotes to get the best deal
- Live a healthy lifestyle to reduce premium costs
- Arrange cover sooner rather than later to avoid higher costs or ill health
- Always choose cover that meets all of your needs
- Calculate the amount of cover you need to avoid paying for more protection
If you want to make sure you’re getting maximum cover, go for two single policies. This is a good choice for partners with children who want to ensure they will be taken care of after losing a parent. If the unfortunate event happens where both parents pass away simultaneously, with joint life insurance there will only be one pay out made upon the first death. This pay out is unlikely to cover the financial burden of losing both parents. However, with two separate policies, there will be two payouts after the passing of each parent. This hardly bares thinking about but if you’re looking for cover to protect your children, it’s something to consider. Two single policies will ensure there is enough cover to protect your family in the event of a worst case scenario.
With joint life insurance, It’s also important to note that if one partner has less favourable health than the other (for example, if one was a smoker with diabetes) this would impact the premium that needs to be paid each month. So the partner in good health may end up paying more due to the other’s poor health.
At the end of the day, what type of life insurance is best for you will really depend on your personal circumstances and needs. It’s important to gather all the information you need on each type of cover and get quotes from different providers to see what they can offer you.
We hope this post has been useful. As you can see, there is a lot to consider when thinking about taking out joint life insurance vs two single policies. If you still aren’t sure on which policy is best for you, we recommend talking to an FCA registered broker for a full joint life insurance vs two single policies comparison. If you know which policy best meets your unique needs then it is vital that you compare multiple quotes at prices can vary wildly between insurers.
Disclosure: This is a contributed post