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Life insurance can be invaluable for couples should one of them die prematurely. The pay-out can help towards expenses such as childcare and university costs, or keeping a roof over the family’s heads.
You could choose to have two separate policies or a joint life insurance policy, which simply covers two people. Getting a joint policy may help shrink the monthly bill but there are things to consider first.
In this article, we explain:
- What is the difference between joint and single life insurance policies?
- How does joint policy life insurance work?
- What are the pros and cons of a joint policy compared to two single policies?
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Joint vs single life insurance policies
If you and your other half decide to take out life insurance, you need to decide whether to take out one policy that covers both of you, known as “joint” life insurance, or to buy two “single” policies.
Which you choose will depend on your circumstances. Here we outline the pros and the cons:
Single Life Insurance
Pros (compared to a joint policy):
Cons:
- There is the potential for two payouts, one on behalf of each person, if both die while insured.
- There can be flexibility in that you could use one policy to opt for a smaller payout or to cover a shorter period than the other, and therefore cut costs. This might help if, for example, one person earns less or only needs to top up “death in service” benefits offered as part of their job.
- You don’t need to put your partner’s medical history in the application for the policy. Perhaps your partner is a smoker and you are not, which could mean you could probably get cheaper quotes.
- You can continue with individual policies even if the relationship breaks down.
- Paying for two separate single life insurance policies may be a bit more expensive than buying a joint policy, although it is always worth getting quotes.
Use the tool below to help you find the best policy for you:
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Joint life insurance
Pros:
- You may cut costs by paying for one joint policy rather than two single ones.
Cons:
- It is limited to one payout, rather than two, even if you both die while insured.
- You are stuck with a single figure for the desired payout on a claim.
- The costs on a joint policy may be driven up if one person is older or in worse health.
- If the policy pays out after the first person dies, the survivor will be left uninsured and could face paying more to start a new policy when they are older and potentially in worse health.
- It may be more expensive or impossible to split a policy if your relationship breaks down.
Find out more: Do I really need life insurance?
How does a joint life insurance policy work?
You can buy different types of life insurance, which both work in different ways.
You can choose between a joint whole-of-life policy, which lasts as long as you do, or a joint-term insurance policy that runs for a set time – for example, until your mortgage ends, your children leave home, or your retirement starts.
With term insurance, you can also choose between policies that pay out a fixed sum (“level” term insurance), or a sum that gets smaller over time (“decreasing” term insurance). This is perhaps because you have taken out the policy to cover a specific, and diminishing, debt such as a mortgage.
You can also find joint over-50s life insurance. This is an option, for people aged 50 to 85, that often doesn’t require answering medical questions.
A joint life insurance policy covers two people but will only ever pay out once. This means you will also need to choose whether any claim should be made after the first person dies, or after both of you pass away.
First death
This is the most common form of joint life insurance. These policies pay out if the first person in the couple dies while the insurance policy is running.
Second death
These joint life insurance policies only pay out once both people have died. They tend to be used for inheritance tax planning purposes, rather than helping loved ones cope after an early death.
Is a joint policy suitable for non-married couples?
Absolutely. Don’t assume a joint policy is only life insurance for married couples – you don’t have to be married, in a civil partnership, or even in a romantic relationship at all; business partners might consider a joint policy.
The key test is whether you have a financial relationship – you can’t just take out life insurance with a passing stranger.
So an unmarried couple, particularly if they have children, should weigh up whether to get joint or single life insurance policies.
However, don’t sign up for a joint life insurance policy lightly, as there are drawbacks.
Is a joint life insurance policy cheaper?
Taking out one joint life insurance policy may well be cheaper than the combined cost of two single policies. This could be important if money is tight.
How much cheaper? According to MoneySupermarket, joint policies are between 7% and 20% cheaper than two single policies.
What happens if you divorce?
If you get divorced, it can be hard to remove one person from a joint policy, unless you have a newer, more flexible policy or have paid for a joint policy that allows for separation without new underwriting.
Kevin Carr, protection specialist at Carr Consulting, says: “You could be stuck with a joint policy unless you are both in good health and can set up new single cover with affordable premiums. This means you could face a payout going to someone you no longer like, if you die. In contrast, if you take out single policies while together, you can each take your own policy if you split.”
Can critical illness cover be added to a joint policy?
Yes, critical illness cover can be added to a joint policy. It pays out tax-free money if you are diagnosed with a serious health condition.
Note that you can only claim if the illness is listed on the policy.
Again, it’s worth considering whether you want to add critical illness to a joint policy, or to a pair of single policies for each person.
Legally, critical illness cover cannot be priced differently based on gender.
However, different insurers may take different attitudes to different diseases, including, for example, prostate cancer and breast cancer.
We have more information and guidance on how to cope financially with a career-threatening illness or disability
What happens if both partners die together?
With a joint policy, there will only be one payout, even in a tragic event such as both people dying together in an accident.
In a fatal car crash, the older person would be declared as having died first, even if the police couldn’t actually determine this.
In this situation, the payout on a joint policy set up on a first-death basis would therefore go to the younger person and then be distributed according to their will, or according to intestacy laws if they died without a will.
You could provide for both policyholders dying together by putting the proceeds from a joint policy “in trust” for someone else, known as the beneficiary. This means that you would nominate someone to benefit from the money and appoint trustees to look after it on their behalf.
When using a joint life, second-death policy, it can be particularly sensible to put it in trust.
The big advantage of a trust is that the payout then goes directly to the beneficiary. It would not get caught up in a probate process and would not be included when calculating any inheritance tax due after death.
In fact, the money could even help pay any inheritance tax bill.
What to consider when choosing a joint life insurance policy
While joint policies may be a good option for some, you will need to weigh up how well a policy meets your own needs.
Compare joint life insurance with a pair of single policies and don’t just be driven by price. Consider factors including your different earnings, assets and health issues.
A joint policy may seem like the easy option to save a few pounds. But single policies bring a lot more flexibility and the potential for two payouts, and avoid issues with getting new cover in later life if you split up.
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