Guide to Single & Joint Life Insurance

If you are building a life with your partner, getting a house together, having children, you may have already considered getting a life insurance policy to protect your finances.

But should you opt for two single policies, or should you go for a joint policy in both of your names?

This guide will outline some of the things you may want to consider if you are wondering whether a joint policy or two single ones would suit you best.

What is a Joint Life Insurance Policy?

A joint life insurance policy covers two people (spouses or those in a civil partner or long-term relationship). They are designed for people who share joint assets, such as a mortgage or children and they are looking to protect themselves in case one person in the couple dies.

However, joint life insurance policies are not exclusively for those with a mortgage and kids. You may seek a joint policy if you share loans or other large debts and you live in rented accommodation. Further, you may be looking for a method to save for your funeral expenses or to protect your inheritance for the beneficiaries of your will.

Please note: It is also possible for business partners to take out a life insurance policy together.

What is a Single Life Insurance Policy?

Life insurance, as a single policy, covers one person’s assets in event of their death. These would be sought for the same reasons as above. However, a single policy will take just the holder’s income, health, and family history etc. into account. The funds released from a payout would go to the surviving partner, or will beneficiaries.

For more on the many different types of Life Insurance products available, take a look at our Life Insurance Types Guide and FAQs section.

Let’s Look at Two Single Life Insurance Policies, as an Example:

Craig and Felicity are a couple who have very different jobs and hobbies. Craig enjoys mountaineering and works as an engineer. Felicity, on the other hand, is a teacher and enjoys baking.

Craig’s sudden passing would leave a greater shortfall in the family expenses. But, his premiums payments will be much higher, because of his dangerous hobby.

Felicity does the bulk of the childcare duties and her salary is much less than Craig’s. So much so, she is unable to contribute to Craig’s life insurance premiums. Therefore, the couple sought two single life insurance policies, to offer their children the maximum protection in the event of either of their deaths.

What are the Benefits of a Single Life Insurance Policy?

  • Income – If the difference in the couple’s income is significant, taking out two single policies may be beneficial. This is because you may require differing amounts of cover. Also, if one of the partners has life insurance through their employer, this means that the other person can choose to take out a slightly cheaper policy. As they will be able to benefit from the security of their partner’s policy, in case the worst happens. However, please note, if you lose your job, you will also lose your employer cover.
  • Two Separate Claims – With two single policies, two claims can be made, if either of you dies. The sums assured and the terms of the policy can also cover all eventualities, offering you more comprehensive cover for your needs. Further, potential issues, such as attempting to split a policy in light of a divorce, are not an issue when both the individual’s needs are covered.

What are the Pitfalls of Two Single Life Insurance Policies?

  • More Expensive Than Joint Policies – In many cases, two separate life insurance policies will cost more than taking out joint cover. However, this is not always the case and will be determined by your individual circumstances. It is also worth noting that the difference in cost, between single and joint policies, may not be very much, and still may be an affordable option.

Let’s Look at a Joint Life Insurance Policy Example:

Lorraine and Geoff sought a joint life insurance policy worth £350,000. After five years, Lorraine sadly passed away and the payout was made to Geoff. However, after three years, Geoff became terminally ill and did not make provisions for a single life insurance policy for himself.

Lorraine and Geoff’s children, therefore, will receive no further funds with Geoff’s eventual passing. However, the mortgage on the couple’s house was taken care of and Geoff has left the remaining life insurance funds to his children, in his will. 

What are the Benefits of a Joint Life Insurance Policy?

  • May be Cheaper for You- If you are sharing the policy premiums with another, you may be able to access a higher level of cover for less than what you would have to pay to take out a single policy for the same amount.
  • Splitting a Policy – With some insurers, splitting a joint policy is possible, if the relationship between the couple breaks down. However, not all insurers are able to do this.
  • Policy in Trust – It is possible to write a joint policy In Trust. Although this is not the case with all policies, check with your provider. In the case of joint life insurance policies, both parties become settlors (i.e. the ones giving the money away). Once it’s made, the trust no longer belongs to the settlors, they just continue to pay into the trust. The trustees manage the trust until its ready for the beneficiaries to take ownership of. Settlors can choose trustees and make themselves a trustee also. However, the trustees must act in the best interest of the trust beneficiaries.

What are the Pitfalls of Taking a Joint Life Insurance Policy?

  • Policy in Trust – With some joint policies, it is not always possible to write the policy In Trust. However, this is not the case with all joint life insurance policies. Please check your policy’s terms and conditions.
  • One Pay Out – With joint policies, the insurance payout happens only once. Either when the first person dies, or the second. Those on a joint policy need to have provisions for their own protection in light of this. It is also worth noting that, heaven forbid, both joint policyholders die in an accident, your will beneficiaries will only receive one payout. In some cases, this may mean that the payout goes to the beneficiaries of the youngest partner.
  • Relationship Breakdown – With joint life insurance policies, there is always the concern that the relationship may end and in which case, what happens to the joint life insurance policy? If, for example, you have no mortgage but you have dependents and you’re split was amicable, you may be happy enough to stick with the joint policy. This may be especially true towards the end of a term policy that lasts say, 10 years. It is very difficult for insurers to ‘split’ a joint policy. Therefore, if one person does not pay their premiums, and the other refuses to cover that person’s share, the policy may end. Then there is the future to take into account. If you both decide to marry and have children with other people, who would be entitled to the single payout? And could you insure your new familial set-up, as well as make the premium payments on your existing joint policy?
  • Insuring Later in Life – If one partner dies and the joint policy ends, the other partner may still need life insurance cover. Life insurance costs typically rise the older you get. So, it may be more affordable, in the long run, for both partners to take out single policies.

What are the Alternatives to Single and Joint Life Insurance Policies?

  • Savings and Investments – Many of us will have some money put by ‘for a rainy day’. Even with life insurance, having back-up funds is always a wise move.
  • Mortgage Insurance – As mortgages tend to be most people’s largest debt, as an alternative, mortgage insurance can cover your mortgage loan if you (or your partner) were to pass away. This may be an option for people who have no dependents or have their other financial commitments otherwise covered.
  • Funeral Plans – If you have paid off your mortgage, have no dependents and no need for further protection, you may just want to find a way to pay for your own funeral in advance. Taking out a funeral plan can help you fix the costs of the funeral, in many cases, and relieve the financial burden that may be placed on your loved ones when you die.

If you would like to find out more about single or joint life insurance, get in touch for a free, no-obligation quote.

I needed life insurance and critical illness for myself and my wife. I got a number of quotes from some of the big brands and was very happy with the final price. Mike Davidson, Birmingham

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