Single vs joint life insurance

Life insurance for couples can provide a financial safety net if one of you dies unexpectedly. Find out how it works and what type of policy might suit your needs best.

Eve Powell
Eve Powell
Updated 6 October 2022  | 3 mins read

Key points

  • Joint life insurance covers both of you but will only pay out once - the cover will end when the first person dies during the policy term
  • If you each have single life cover, there’s the potential for two payouts if you both die during the policy term
  • A joint policy is usually cheaper than two single policies, but doesn’t provide the same flexibility
  • If you separate, you’ll usually have the option to cancel a joint policy, or one partner can take it over so that it just covers them

What is single life insurance?

A single life insurance policy covers one person and will only pay out if the policyholder dies during the policy term.

As the policyholder, you’ll choose the amount you’re covered for and the length of the policy.

Single life insurance policies can offer more flexibility than joint policies, so if you're in a couple, you can both have separate policies and be insured for different amounts.

If one of you dies during the policy term, the other person’s individual cover will continue until they die or the policy ends.

And if you have individual cover and end up separating, you can both continue with your own policies without any interruption. Although you may want to change the beneficiaries of the policy if it includes your ex-partner.

What is joint life insurance?

A joint life insurance covers two lives on the same policy for one monthly premium. It usually costs less than having two single policies.

If one of you dies during the policy term, the surviving partner will receive a lump sum payout that can help with costs like mortgage repayments and living expenses.

Both partners must be insured for the same amount and the policy will only pay out once, so the cover will end when the first person dies.

If you still need life insurance as the remaining person, replacing your cover is likely to cost more due to your age and health.

What happens to our joint policy if we separate?

To some extent this depends on your insurer, as some policies have a separation option, although this may mean that you pay a higher premium.

Having this option means that if your relationship ends, your insurer can split the policy to allow each person’s cover to continue separately.

If you don’t have a separation clause, there are a couple of things you could do.

Firstly, one of you may be able to take over the joint policy and responsibility for paying the premiums. The other person would then need to take out separate cover of their own.

The other option is to cancel the joint policy and start afresh by both of you taking out new individual life cover to suit your needs. You won’t receive a refund on any premiums you’ve already paid but you usually won’t be charged for ending a life insurance policy early.

What’s the best life insurance for couples?

As well as deciding whether single or joint life insurance is best for your needs, there are also different types of cover you can choose from.

Decreasing term life insurance

With this type of policy, the payout reduces over the policy term, so it’s often used to cover repayment mortgages. It’s usually cheaper than other types of cover, but the decreasing payout may not provide enough to cater for other costs, like ongoing living expenses.

Increasing term life insurance

Your payout will increase by a fixed amount annually for the duration of the policy, this will protect it from inflation.

Level term life insurance

The potential payout on a level term policy stays the same until the policy ends. The amount of cover you choose can provide financial protection for more than just the mortgage. But because the policy’s payout sum is fixed, it’s usually more expensive than decreasing term options.

Whole of life cover

Instead of a policy term with a fixed end date, whole of life cover only ends when you pass away. This type of cover is generally more expensive because a payout is guaranteed at some point. Depending on the payout amount, your family might have to pay inheritance tax if the policy isn’t written in trust.

Critical illness cover

It’s possible to add critical illness cover to your life insurance, whether it’s a single or joint policy. This will pay out a tax-free sum if you’re diagnosed with a serious health condition that’s covered in the terms and conditions.

What else should we consider?

Life insurance can provide a financial safety net if one of you passes away and it’s particularly important if you have children or financial dependants.

To help you get the right cover, you should think about:

  1. The cover amount

    You'll need to consider how much money your loved ones might need if you passed away. You could choose an amount to cover the mortgage or a lump sum that would pay off your debts and replace your income for several years.

  2. The policy length

    You might choose a length of policy to match your mortgage term or consider how long you’d want your children, spouse or dependants to have financial support if you were no longer around.

  3. Inheritance tax

    A life insurance payout could be subject to inheritance tax. One option is to choose to write your life insurance in trust. This means it would avoid probate and wouldn’t be included in any inheritance tax calculations.

  4. Your earnings

    If one partner earns much more than the other, it’s worth considering two separate policies. That way you can choose different levels of cover to balance the finances if one of you passes away unexpectedly.

  5. Flexibility

    The future can be hard to predict, so having individual policies can make it easier if you were to separate or divorce. It will also provide the potential for your beneficiaries to receive a payout for each death.

  6. Your budget

    You’ll need to pay a monthly premium for several years, so work out what you can reasonably afford. Shop around and compare quotes - two single policies may end up costing the same as a joint policy and will provide you with double the protection.