3 reasons that you and your partner should buy separate life and critical illness insurance policies

If you're thinking of taking out life or critical illness insurance and you’re in a relationship it might seem obvious to take out a joint policy with your spouse or partner. 

This gives you the peace of mind that your dependents will be financially catered for in the event of your death or a serious illness. However, taking out a joint life policy might not actually be the best option. In some cases it can actually be beneficial to take out single life policies in your own names. Keep reading to find out why.

The difference between joint and single life policies 

Before we consider reasons why you would consider single life policies rather than joint cover, you should know the difference between these types of cover.

If you opt for joint cover then you and your partner will be protected by a single plan on the same terms and conditions.

If you take out two policies, these will be entirely separate. That means, if a claim is made on one, it will have no impact on the other. These can be identical policies or you may decide that different levels of cover are appropriate.

You effectively double the amount of cover

If you opt for a joint policy, it’s important to remember there will only be one pay-out.

Here’s an example. If you are a married couple and you have a joint policy, and you were both to die in a car accident, your dependents would only receive one lump sum payment from the policy.

However, if you had taken out individual single life policies and you were both to die in a car accident, each policy would pay out. This means you would effectively double the benefit to your dependents.

The same is true with a critical illness policy. If you take separate policies and one of you makes a successful claim, the other person retains their cover. That means they may also be able to make a claim in the future.

It doesn't cost much more

One of the main reasons that people choose to take out a joint life policy is that it can often work out cheaper. At the very basic level you generally end up paying one ‘policy fee’ rather than two.

However, the additional cost of taking out separate policies is typically not as much as you may imagine. It can often be as little as 5 or 10 per cent more expensive than a joint policy and so don’t assume that two separate plans are twice as expensive.

Do remember though that if the premiums for separate policies aren’t affordable, having a joint policy is much better than not having no cover at all.

You don’t have to cancel cover if your circumstances change

One major disadvantage of a joint policy is that you can’t ‘split’ the policy if your relationship breaks down. That means if you or your partner decides that they don’t want to pay your share of the premium, the policy would probably cease. That is because if you don’t pay life insurance premiums, the policy will generally terminate.

You could also face issues over who is entitled to any pay-out from a joint policy, particularly if one of the former partners remarries and has children with their new spouse.

Having separate policies avoids these problems. If your relationship does end then each of you has your own cover and you can protect your dependents as you choose.