Joint vs Single Policy Life Insurance

Many couple opt to open up joint life insurance policies to cover both partners, often paying out just when the first partner dies but often coming with the option of two pay-outs.

Over the course of this guide we’ll go through the associated costs and benefits to help you decide whether or not a joint life insurance policy is right for you.

In This Guide:

• Single pay-out
• First death and second death policies
• Conditions of joint life insurance
• Costs of joint life insurance

Single pay-out

Joint life insurance policies pay out only once, generally on the death of the first partner.

For example, if a couple takes out a joint life insurance policy worth £450,000, then if the first partner dies after 10 years, the policy will be paid out, and the living partner will no longer be protected.

If there are dependents left when the second partner passes away, this can become an issue. To avoid this, you can opt for a joint life insurance policy that allows a pay-out on the second death instead.

First death and second death policies

As mentioned above, most joint life insurance policies work one a single pay-out basis, general on a first die first pay basis.

However, when you open the policy you’ll sometimes have the option of getting the insurer to pay out on the second death instead.

Say for example, a husband and wife are insured to the value of £600,000 and the husband dies first. The family may choose not to receive the pay-out then and to instead receive when the wife dies later.

Second death joint life insurance policies are, in general, cheaper than those that pay out on the first death as the risk of a claim being made is reduced. Remember though that there will still only be one single pay-out for the whole policy.

Conditions of joint life insurance

You don’t need to be married or be part of a ‘traditional household’ in order to qualify for a joint life insurance policy. However if your household is set up such that there is one main breadwinner, a joint life insurance policy might work out better than it would in a household with two equal earners.

You’ll have the option, when taking out a joint life insurance policy, of insuring each partner for different amounts, thereby reducing the cost of the premiums somewhat. So if one partner is the main earner and their death leaves a considerable straightforward financial shortfall in the household, they might be worth more in terms of a pay-out than the other, who’s death might simply impose financial burdens related to, say, childcare.

If both partners in a couple are equal earners, both contributing roughly the same amount to the household expenses, then it might be a better option to consider two separate life insurance policies. Of course, this will be more expensive, but there will be two pay-outs rather than one, both reflecting the financial burden imposed on the dependents by the death of either party.

Costs of joint life insurance

Joint life insurance policies are a cheaper option than two separate individual life insurance policies because of the single pay-out. However, it is always worth balancing up this cost with the necessity of larger pay-outs for each partner, so you should have a serious think about the financial impact on any dependents of the death of each partner before you jump into a joint life insurance policy.