If you have dependents, it’s important that you take out life insurance as a priority, as this will ensure that they receive the funds needed to take care of themselves when you pass away. However, if you’re part of a couple it can be difficult to work out whether you need a single or joint policy.
Here, we take a look at the difference between single and joint life insurance policies and highlight some of the factors you should take into consideration when choosing yours.
What is a single life policy?
A single life insurance policy covers just one individual and will pay out should the person holding the policy die. If both individuals within a couple have their own single life insurance policies, they will still hold their own policy should their partner pass away. In the event that both individuals die, their dependents would likely receive two separate pay outs – one from each single policy.
What is a joint life policy?
A joint life insurance policy covers two people and there are a couple of types to look out for. A First Death policy will pay out if one person in the couple dies, leaving the other one without life insurance cover. An increase in age may then make taking out a single policy for the remaining individual pricier. A Second Death policy will pay out on second death, as the name suggests, but this type of cover is usually only taken out for estate or tax planning rather than for taking care of dependents, as no money would be released in the event that just one of the two people passed away.
If you both require the same type of cover for the same period of time, to be able to pay off the mortgage if one of you dies for example, a joint policy could be the perfect option for you. However, if one of you really requires more cover than the other, opting for joint protection could leave the remaining individual with a shortfall should the worse happen.
Is a joint life insurance policy cheaper than two single ones?
You might think that taking out a joint policy would be cheaper than opting for two single ones, but this isn’t always the case. Your insurance premiums will depend on your age, health, and occupation amongst other things, and you might find that when these things are taken into consideration the difference in price between the two policy types isn’t very much at all.
It could be that you consider saving money on premiums through only getting life insurance for the main earner (if there is one in your couple). However, you should think about the costs that may need covering should the lower earner pass away e.g. childcare fees. One of the advantages of using a protection adviser, such as Choice, is that we can fully assess your life insurance needs and come up with solutions that cover you in the most cost efficient way possible.
What happens to a joint life insurance policy following a break-up?
An important thing to consider when deciding whether to opt for a single or joint life insurance policy is what you’d do if your relationship were to end. It’s not a nice thing to have to discuss with your significant other, but not having a plan in place could leave you both worse off should you go your separate ways.
Following a break-up, some insurance companies might split your joint policy into two single ones, but this could result in higher premiums for you both. You might also be able to convert your joint policy into a single one – perhaps for the person that will be covering the mortgage payments. Alternatively, you could choose to cancel your joint policy, but you won’t be refunded for the money you’ve paid into it.
If you’re unsure of what you’d do, the best option would be to take out two single life insurance policies, as this way you’d both be covered if you were to split up in the future.
Choosing a single or joint life insurance policy is really down to your personal requirements and the type of cover you’d like to take out. For help with your financial planning needs, contact us today.