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Joint versus Single Life Insurance for Couples
Once a couple have decided to take out life insurance, the majority of them it seems, are not aware that in many cases it can be more beneficial to take out two single life plans rather than one joint life ‘first death’ plan.
It is of utmost importance therefore, to understand the financial implications of taking out a joint life insurance policy rather than two single ones. Joint life insurance is available as a joint life 'first death' insurance plan which means that the policy pays out for the first death in the partnership, but thereafter the plan ceases and the surviving partner is no longer covered. Two single policies however are not subject to the ‘first death’ rule and will lead to two payouts and potentially a lot more money for dependants.
There are further significant advantages to taking out two individual policies rather than one joint one. By taking out two individual policies, the surviving partner will not have to purchase cover for themselves when their partner dies. Since the first partner will usually die when both partners are older, the surviving partner may well have difficulty finding a suitably inexpensive policy because insurance providers increase the premiums you pay according to your age.
A further benefit of two separate life policies is their ability to be easily 'written in trust'. This means the money will go to the named beneficiaries; it avoids any lengthy delays in receiving payout; and perhaps most significantly of all, neatly bypasses inheritance tax. A joint policy on the other hand, is much harder to write 'in trust'. Another issue to consider is the possibility of the relationship breaking down at some point in the future. In most cases, you will simply have to cancel the joint policy and seek new individual ones – possibly at a higher cost given that you will be older and premiums may have risen.
Indeed, although one joint policy may like seem a cheaper option, reports suggest that there is little extra cost nowadays to taking out two separate policies rather than one joint policy. In addition, individual life policies can be customised to suit the lifestyle, health and circumstances of each person. This cannot be done with a joint life policy since the plan has to cover both individuals in a partnership policy. Given that many industry insiders are now calling for a redesign of joint life plans to address some of these issues it is apparent that couples may well be better off getting individual life cover rather than joint.
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