Guide to joint life insurance
- Whether a joint life policy is better than two individual policies will depend on your particular circumstances
- Broadly speaking, a joint policy is more likely to be suitable if a couple has no other dependants to consider
- It's important to consider what would happen if a couple were to split up
- Ensure you know whether a policy pays out on the first or second death; second-death policies are rare and mainly used for inheritance purposes
If you're part of a couple looking to take out life insurance, it may seem the most natural thing to arrange a joint policy rather than two individual ones.
Before you do this, though, make sure you understand the full implications… the choice will depend on your particular circumstances and, for some people, taking out two separate policies will be the better choice.
"Joint life insurance can be cheaper but don't rule out taking two single plans instead," said Michael Tebbutt of protection broker LifeSearch.
"The premium is usually similar, and this option could pay out somewhere in the region of twice as much if both of you were to pass away."
Advantages of joint life insurance policies
One of the obvious advantages of arranging a joint policy rather than two individual ones is convenience - you'll only have to deal with one provider and one set of paperwork.
Also, the premium you pay on a joint policy is likely to be less than the amount you'd spend on two separate life insurance policies. If you don't have any dependants to consider, this may be the deciding factor and a joint policy could be the right option for you.
However, it's important to think carefully about the disadvantages of joint policies, which can be significant…
Disadvantages of joint life insurance policies
While a joint policy may be a little cheaper and more convenient than arranging two individual ones, this may not outweigh the downsides, especially if you have dependants.
Perhaps the most important point is that a joint policy will only pay out once, while two policies could pay out twice.
If you don't have dependants this may be irrelevant; the surviving partner will receive a payout and may not be concerned about what happens when they themselves pass away.
However, if there are dependants to consider, a potential double payout from two individual policies may be worth close to twice as much as a payout from a joint policy.
Under second-death policies a surviving partner would not receive a payout - any payout would only go to the estate after the surviving partner's death. Such policies are increasingly rare and are mainly used for inheritance purposes.
Most joint life policies are designed to pay out after the first death, meaning the surviving partner receives the benefit.
Having children later in life
If you've set up a joint life policy but your circumstances change in succeeding years - perhaps because you have children - it's worth knowing that it's possible to hold multiple life insurance policies.
This can be worth considering because policies tend to be more expensive to arrange as you get older and/or have health problems; this could mean it makes sense to keep an existing joint policy in place but to take out an additional policy to cover increased commitments.
What if a couple split up?
Not many people like to think about life insurance and not many couples like to think about the possibility that they'll split up one day, but both things should be considered if you're planning a joint life policy.
Unless the split is so amicable that the couple are prepared to continue with the same financial arrangements, a joint policy may need to be cancelled.
Each individual may then want to consider making their own life insurance arrangements, but their age and, perhaps, state of health may make this more expensive than if they'd earlier arranged a single life rather than a joint life policy.
Arranging life insurance for a couple
Should you compare life insurance through Gocompare.com you'll see a clear choice on our form asking whether you'd like to arrange cover for yourself, or for you and someone else.
The policy options you're presented with on the results page will be appropriate to this answer.
If you're finding it hard to decide on the right option, or you just want more information, remember that our partners LifeSearch can provide fee-free, impartial advice.
Either call 0800 072 1145¥ or - to save your phone bill - request a call back through our main life insurance landing page.
By Sean Davies