June 23, 2022
  • June 23, 2022

What is joint life insurance? – Forbes Advisor UK

By on November 17, 2021 0


If you and your partner are considering purchasing life insurance, you will have the option of purchasing a policy together, this is called joint life insurance.

In this guide, we explain exactly how joint life coverage works to help you assess whether it might be right for you.

What is joint life insurance?

Joint life insurance is a type of life insurance policy that covers two people, but usually only pays once.

Joint life insurance can be attractive if you are married or live with your partner, especially if you have children. In some cases, this can also be useful for business partners.

The payout from a joint life insurance policy usually comes in the form of a tax-free lump sum that your beneficiaries – the ones you choose to receive the money – can use to cover debts such as a loan. mortgage, credit card or personal loan, as well as paying household bills and daily living costs.

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How does joint life insurance work?

It will depend on whether you have a first-to-die policy or a second-to-die policy.

First-death policies pay when the first person dies, and after that point the coverage provided by the policy will end.

Second death policies pay once both policyholders have died, i.e. after the second death.

Whether you have a first-to-die policy or a second-to-die policy, there will only be one payment.

First-to-die policies are the most common, while second-to-die policies may be an option if you purchase lifelong coverage.

How is joint life insurance different from individual life insurance?

While joint life insurance covers two people, individual life insurance covers only one person. Couples can therefore choose to purchase two individual life insurance policies rather than a joint policy if they wish.

The main benefit of buying two unique policies is that if both partners die during the term of their policy, their beneficiaries will receive two payments, one after each death. But since individual life insurance effectively offers double the coverage, it can be more expensive than joint coverage, which pays only once in most cases.

What are the advantages and disadvantages of joint life insurance?

Advantages

  • joint coverage may be more affordable than individual life insurance
  • with first-to-die policies, payment goes directly to the surviving partner, which can speed up the payment process
  • it is not necessary to be married to take out solidarity coverage.

The inconvenients

  • your beneficiaries will only receive one payment
  • in the event of separation of a couple with joint cover, the contract cannot generally be divided.

What types of joint life insurance can you buy?

When comparing joint life insurance policies, you will be able to choose from the following types of coverage:

  • Level term: where the amount of coverage and your premiums stay the same for the duration of the contract
  • Decreasing duration: where the amount of coverage decreases over time, often depending on an outstanding debt such as a repayment mortgage – this is often the cheapest option
  • Ascending term: where the amount of coverage increases over time to protect the value of your policy against inflation. Your premiums will also gradually increase
  • All the life : designed to pay whenever you die, rather than within a specified time frame. This type of policy is typically used for estate planning rather than protecting the immediate financial well-being of the family.

What happens to a joint life insurance policy if you separate?

If you have a joint and separate life insurance policy from your partner, you will usually have the option to terminate the policy or a partner may be able to take over the policy so that it only covers him.

If you choose to cancel the policy, there will be no refund of premium or payment. Instead, if you want coverage to continue, you’ll need to purchase a new individual life insurance policy. However, since you will be older, the cost of this new policy will likely be higher, as age is one of the main factors determining the amount of premiums.

And if your health has deteriorated since you purchased the original joint policy, that will increase your costs as well.

Some insurers will allow a partner to take over the joint policy, but keep in mind that this partner will have to cover the cost of the monthly premiums themselves. The remaining partner will then have to organize a separate cover.

Is Joint Life Insurance Right For Me?

To help you decide if a joint life insurance policy might work for you and your partner, or if you’d better buy two unique policies, it’s worth considering the following:

It is often less expensive to purchase one joint life insurance policy than to purchase two individual policies. So if cost is a big factor and your budget is tight, a joint life insurance policy may be the best option.

The amount of coverage you need is also an important factor. Joint coverage can be a good option if you both need the same level of coverage for the same length of time – for example, if covering your joint mortgage is the top priority.

However, if one partner earns significantly more than the other, or if you have dependents who will be dependent on the money that might be paid, two unique policies might be more appropriate. This way, you can choose different levels of coverage and your dependents could receive two payments, potentially leaving them financially better off.

Remember that even if you are a stay-at-home parent, life insurance can still prove to be invaluable – if you were no longer around, your partner might have to give up work to care for the children or pay for it. custody of children.

Keep in mind that if your relationship breaks down and you have a joint policy, you may need to purchase separate coverage at a later date, which could be more expensive. You may therefore prefer to take out two individual life insurance policies.

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