What is joint life insurance?
Joint life insurance, sometimes referred to as life insurance for couples, describes when two people take out a policy which covers them simultaneously.
You pay one monthly premium, there’s one contract and the terms of the policy cover both named parties.
When you’re part of a couple taking out joint life insurance may seem like the obvious choice. Perhaps you already have a joint bank account and mortgage, so why pay two premiums when you can pay one?
However, there are actually several things to consider before opting for a joint life insurance policy.
Below we explore the key considerations to help you make an informed decision as to whether to choose a joint or two single policies.
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The cost of joint life insurance premiums
The main advantage of joint life insurance is that it’s generally cheaper, compared with taking out two single policies.
Therefore if you’re on a tight budget and in a steady relationship, all things being equal, a joint policy could be a good option for you and your partner.
However, when it comes to life insurance, circumstances are rarely that simple.
As stated above, having joint life insurance means that you’re both covered by the terms of the same policy. As a result, any factors which result in higher premiums will affect both parties.
This may not seem like a huge issue and it may not be. But, if either partner has medical issues, partakes in extreme sports or is a smoker, it could greatly increase your premiums.
This could mean that one partner ends up paying over the odds for their half of the policy.
Joint life insurance pay out
Remember, joint life insurance, although cheaper than two single policies, will only ever pay out once.
During the application, a pay out sum is agreed upon and when one of you dies, a pay out for this amount is issued. The policy then expires and cover ends.
Thereafter the surviving partner has to either secure a new policy or go uncovered. As a result of being older, monthly premiums will be higher.
Equally, if both mum and dad were to die at the same time, only one pay out would be issued.
Providing for your children if you’re no longer around
It’s likely that if you have children, they’ll be the beneficiaries of your life insurance.
Therefore, when deciding on whether to choose joint cover, you need to consider who the pay out is intended to protect.
A couple with no children may only be looking to cover each other and a single pay out may be sufficient.
However, a couple with children may require greater coverage, so that in the dreadful event that both partners pass, the dependants are left with sufficient funds.
Similarly, you need to consider the true value of a stay-at-home parent and not just protect the family breadwinner.
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Joint life insurance after divorce
Unfortunately, relationship breakups happen, but did you know commonly a joint life insurance policy cannot be divided if this occurs?
Only a small number of life insurance providers give the option to split a life insurance policy or to remove one party making it into a single policy.
If your insurer doesn’t provide this option either an agreement has to be reached in order to continue the life insurance or the policy is cancelled.
However, reaching an agreement can be difficult depending on how amicable the break-up is. It poses questions such as:
- Who pays into the policy?
- How much should each party contribute?
- Who is entitled to the pay out if either party remarries
- What if one party has further children?
If the policy has been written into trust, you could also face further complications.
If written into an absolute trust it is very unlikely you can change the details, such as the named beneficiaries, meaning if your ex-spouse was named, they would receive the pay out upon your death.
However, if you have a flexible or discretionary trust you should be able to make the required changes, post-divorce.
If it’s decided that the policy is to be cancelled, all of the premiums which have been paid in will be lost.
What’s more, both parties will then need to find new cover with increased premiums (due to being older) or risk leaving themselves uninsured.
If you find yourself in this position, get in contact with an independent life insurance broker who can help you find the best solution for your circumstances.
Family medical history
A poor family medical history on either side could affect the policy terms for both parties.
During the application process, both parties will be asked questions about their family’s medical history. In some instances, when underwriting your policy, this information will be taken into account and can be added as an exclusion on your policy.
For example, if your father died of bowel cancer, it may be written into your policy that if you die of bowel cancer then the policy will not pay out.
This can become an issue when taking out a joint life insurance policy as the medical family history of one partner affects the overall terms for both parties.
The best insurer
When taking out joint life insurance, the couple is covered by the same insurer. Therefore, what may be the best insurer for one partner may not be the best for both.
For example, there are many specialist insurers in the industry from those specialising in mental health, to those specialising in extreme sports. The medical history or lifestyle of one partner may best be suited to one of these specialist insurers.
Taking out a joint life insurance policy with a major insurer may not be possible if one partner is declined. This could result in the other partner paying over the odds as a result of using a specialist insurer when it’s unnecessary.
The application process
The application process is usually quicker for joint life insurance.
Due to the necessity of only having to complete one application as opposed to two, the application process for joint life insurance is normally simpler and quicker.
A lot of information can be duplicated and only medical information needs to be processed separately.
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Joint over 50s life insurance
Joint over 50s life insurance doesn’t bring with it the issues of medical influence.
Over 50 life insurance is a great option if you’re aged between 50-85, particularly if in poor health, as acceptance is guaranteed and no medical information is required.
For this reason, joint over 50 plans may be more suitable for some, as medical issues don’t affect premiums.
Joint survivorship life insurance
Joint survivorship life insurance pays upon the last death as opposed to first.
Unlike traditional joint life insurance, joint survivorship life insurance pays out on the death of the last remaining policyholder.
Unfortunately, Reassured does not offer this type of joint life insurance at this time.
Joint life insurance for business partners
Taking out a joint life insurance with a business partner offers protection for the business to remain functioning should the worst happen to either party.
Whilst a joint policy may not be the best option for couples (particularly with children) as only one pay out is provided, this may not be the case for business partners.
The pay out could be used to pay off business loans, invest in new a partnership or even to maintain the running costs of the business.
Joint funeral plans
A joint funeral plan can secure the cost of a funeral at today’s prices and only involves making one set of payments.
If you’re only looking to cover your funeral, or are unable to obtain life insurance, taking out a prepaid plan can secure the cost of your funeral at today’s rate.
Similar to joint life insurance, it’s possible to take out a joint funeral plan which will cover two people simultaneously.
This is again cheaper than paying for two single funeral plans but will only pay for one funeral.
Once the funeral plan has paid out, it’s no longer valid, leaving the remaining partner (or more likely their loved ones) to fund the second funeral.
For this reason, it’s likely to be most beneficial to take out two funeral plans, to ensure both partners funerals are secured at today’s prices.
Help from the life insurance experts
Choosing whether to go for a single or joint life insurance policy is a very subjective decision.
If you’re still unsure of the best option to take, getting in touch with an FCA registered life insurance broker, like Reassured, could help.
Whichever option you choose, the best way to secure the right policy, at the cheapest price, is to compare quotes.
Why not save yourself both time and money and let us search the market for you.
And the best bit is, there’s absolutely no fee for using our award-winning service.
Joint life insurance in summary:
- Generally cheaper compared with two single policies
- The application process is quicker
- Will only ever pay out once, (usually on first death)
- Two single policies could provide double the cover
- If the relationship breaks down the policy cannot be divided
- If one party has personal/family medical problems this affects the overall cost
- After a pay out is issued the policy expires. (Leaving the remaining partner either uninsured or left paying higher premiums).