Should I get a single or joint life insurance policy?
If you’re in a relationship and are thinking about life insurance, you’ll need to consider whether a single or joint policy will work best for you. We explore both options so that you can make an informed decision that can help ease money worries for those you leave behind.
How does life insurance work?
If you take out a life insurance policy, your dependents will receive a pay out when you pass away. The amount they receive will depend on the value agreed with the insurer (known as the sum assured).
There are different types of life insurance policy to choose from, but they can be broadly split into two main categories:
Term life insurance
These policies are only active for a limited amount of time (the term), for example, ten or 25-years. For the policy to remain active, you’ll need to pay your monthly premiums on time. If you miss payments your policy will lapse and become invalid.
If you pass away during the agreed term, the policy will pay out and your beneficiaries will receive a lump sum payment. Some policies may have the option of splitting the payout into regular instalments instead.
If you want, you can specify how the money should be used, for example, to pay off the mortgage, cover childcare costs or school and university fees.
There are different types of term life insurance to choose from, so you’ll need to think about which option is best suited to your needs. You can find out more in our guide.
Whole of life insurance
These policies (as the name implies) run for the whole of your life, not just for a limited term. As with term policies, you’ll need to keep up with your premiums for the plan to remain active.
As they run for the entirety of your life, whole of life policies tend to be more expensive. However, they’ll pay out whenever you die, whether that’s ten years or 30 years after you took out the policy (as long as you pay your premiums).
What’s the difference between single and joint life insurance?
A single life insurance policy covers just one person. When the policyholder dies, the sum assured will be paid out to their beneficiaries (unless the terms of the contract have been broken in any way).
A joint life insurance policy (or couples life insurance) covers two people but only charges one premium. With joint life insurance, the sum assured is the same for both people named on the policy. For example, if the value of the policy was £300,000, this is what the remaining partner would receive regardless of who dies first.
You can buy single and joint life insurance as a term policy or as a whole of life plan.
When do joint life insurance policies pay out?
Life insurance policies only pay out once. With that in mind, it’s important to know that joint life insurance typically pays out on a ‘first death’ basis. In other words, after the first person passes away, the policy will pay out and then end. Unless the remaining partner has another life insurance policy, this will leave them without cover.
It’s also worth remembering that life insurance premiums tend to increase with age. If the remaining partner then decides to take out their own life insurance policy, it could mean paying high premiums.
Can you get joint policies that pay out after the second person dies?
Yes, you can. With second death policies, the payout is only released when the remaining policyholder passes away. Life insurance plans that operate like this are usually whole of life policies which are typically more expensive compared to term cover.
What are the pros and cons of a single life insurance policy?
Benefits of a single life insurance policy include:
- One policy per person which will provide two payouts
- Policyholder can choose the sum assured
- Each person is covered by their own policy
Disadvantages include:
- Can be more expensive as there are two premiums to pay
What are the pros and cons of a joint life insurance policy?
Benefits of a joint life insurance policy include:
- Usually works out cheaper than two single policies
- Only one application needed
- Payout provided no matter which partner passes away first (subject to the policy terms)
Disadvantages include:
- Policy ends after payout leaving the second policyholder without cover
- As life insurance becomes more expensive with age, the remaining partner could face high premiums if they decide to take out their own policy
What happens to our couples life insurance if we separate?
This will depend on the terms and conditions of your policy. Some life insurance plans will allow you to split the policy so that you each have your own. Others might allow you to convert your joint plan into a single policy to cover the cost of a joint asset – like the family home. Both these options could lead to higher premiums.
The alternative is to cancel the policy. However, it’s important to know that if you do this, you won’t get a refund on any of your premiums.
How much does life insurance cost?
When it comes to working out your premiums, insurers will consider a range of factors, for example:
- The type of policy you choose – for instance, term or whole of life cover.
- Your age – life insurance becomes more expensive the older you get.
- Your job – some jobs are considered higher risk than others and premiums will reflect this.
- Lifestyle – regularly smoking or drinking alcohol can mean you pay more than a non-smoker or teetotaller.
- Overall health – if you have a history of poor health, this could affect what you pay.
Which is better, single or joint life insurance?
No policy is better than another, it simply comes down to what suits your needs the most. When you consider the options, think about:
Why you want life insurance in the first place
Joint policies can be a good option if the intention is to use the payout to cover a joint asset. This could be a mortgage on the family home or another type of loan.
Remember that couples life insurance only pays out once and typically on the first death, leaving the remaining partner without cover. If the second partner unexpectedly dies without taking out their own life insurance, it could leave dependents without a financial safety net.
Budget
Joint policies usually work out cheaper as there’s only one premium to pay between you. This can also benefit couples if one of you smokes or has a history of poor health.
Future changes
When you compare policies, it’s well worth spending some time checking terms and conditions that relate to future changes. For example, if you were to separate, is there an option to split the policies so that you both have cover.
Similarly, check if there’s an option to increase the sum assured. Most policies include a ‘special event’ clause which allows you to increase the value of your policy or make other changes when major milestones occur; for instance, if you go from co-habiting to getting married, having or adopting a child.
Secure the future for loved ones with life insurance
Life insurance can be a difficult topic to talk about but if you’ve got dependents such as children or elderly relatives, it’s one worth exploring. Policies help provide a financial buffer and can ease money worries at a time of grief and stress.
For more information about all types of life insurance, head to our guide which can help you make the right choice for you and your loved ones.