This is a guest post by FCA registered brokerage; Reassured. Joint life insurance is a policy taken out by a couple, which protects both parties simultaneously. You pay one monthly premium, there’s a single policy document and the terms and conditions cover both named parties. But is joint life insurance cover always the best option? From our experience, those in long-term relationships, often choose joint life insurance without considering the alternatives. After all, they probably already share the household bills, a bank account and/or a mortgage with their partner.
However, while joint cover may seem like the obvious choice if you’re in a couple, it’s crucial that you consider a number of factors before making a decision.
“More people tend to opt for single level life insurance at 58.4%, while joint life insurance is slightly less popular at 41.6%.” (Source: Money Supermarket)
Joint life insurance: Pros
The main benefit of joint life insurance is that it’s cheaper than taking out two single policies. You only pay one monthly premium, instead of two, (making a saving of approximately 25%).
The application process is also generally faster for a joint policy too. After all, you only need to complete one application and a large percentage of information can be duplicated.
For couples without children, a joint policy may provide sufficient coverage. If one of you passes during the policy term, your partner benefits from a full payout to clear the mortgage etc.
So, if you’re on a tight budget and don’t have any children, then joint life insurance may be a good option for you and your partner.
However, if you have children to consider you probably require additional protection to cover future living costs, replace a loss income, childcare fees, university fees etc.
£232.84 per week – The average cost of full-time childcare in the UK (source: https://www.moneyadviceservice.org.uk)
Joint life insurance: Disadvantages
Remember, having a joint policy means that both parties are covered by the same terms.
Therefore, any factors such as medical issues and lifestyle choices that result in higher premiums for one person, will affect both parties. This means that one of you could be paying more for your half of the policy than is necessary.
In addition, a poor family medical history could also have a negative impact on the policy terms for both parties. However, the big disadvantage of a joint policy is that it will only ever payout once.
So in the awful scenario where both you and your partner pass at the same time, only one payout would be issued. If you have children this could have a huge impact on their future financial security.
£187,120 – the average full cost of raising a child over 18 years for a lone parent (source: http://www.cpag.org.uk)
In contrast, with two single policies, there would be two separate payouts. In short, two single policies provides double the cover protection.
Another consideration is what if the relationship breaks down. This causes a problem as a joint life insurance policy cannot be divided.
You would either need to both amicably continue paying the premiums or cancel the policy (losing your investment) and take out new policies (when older, therefore paying higher premiums).
Lastly, if you have joint life insurance and one of you dies, this leaves the remaining partner either uncovered or again left trying to secure a new policy.
Remember stay-at-home parents need life insurance too. See this thought provoking infographic from Reassured:
So, in conclusion, there is a place for joint life insurance, especially if money is tight. However, it should not just be the default choice just because you’re part of a couple.
In fact, taking out two separate policies provides double the coverage and the monthly premium cost is generally not significantly more expensive. If you have children this additional coverage could one day be vital.
Joint life insurance vs 2 single policies summary
- Joint cover cheaper than 2 single policies
- Joint cover quicker application process
- Joint cover only ever pays out once
- One person’s family/personal medical issues affect the overall cost
- You can’t split the policy if the relationship breaks down
- 2 single policies provide double the cover
- 2 single policies are approximately 25% more expensive on average.
If you have any views I would love to hear them in the comments below or on social media: @mummyconstant.