When it comes to buying life insurance, you have lots of choices. You’ll need to consider questions such as:
- What type of life insurance should I have?
- Where do I buy life insurance?
- How much life insurance do I need?
If you have a spouse or partner, or you’re co-habiting, you’ll also need to consider whether you should take out financial protection in your own name, or jointly with another person.
When it comes to arranging life insurance, you can take out a separate, single life insurance policy that just covers you. Alternatively, you could buy a joint life insurance policy that covers both you and another party – for example, your wife, husband, or partner.
There are pros and cons of each approach, so read on to find out whether single or joint life cover is the right option for you.
Single life or joint life insurance – what’s the difference?
Most people take out life insurance for a specific reason. This might be to pay off your mortgage or to provide a lump sum to your family if the worst happens.
You will typically take out a policy for a fixed period. This might be for the duration of your mortgage, until your children are 21, or until your expected retirement age. Once the term expires, your policy ends, and you no longer have insurance in place.
You choose the length of your policy when you apply for life insurance. You can also choose between decreasing term and level term cover.
- Decreasing life insurance – the amount of cover reduces over time. It is typically used to cover a repayment mortgage where the amount you owe to your lender reduces over time.
- Level life insurance – the amount of cover remains the same for the term of the policy. It ensures that your beneficiaries will receive a fixed lump sum if you die within the term.
You’ll also have the choice of taking out cover in your single name, or jointly with your spouse or partner.
Single life insurance pays out a lump sum if the policyholder dies during the policy term. In a simple example, if both you and your partner had identical, single life insurance policies and you died on the same day, each policy would pay out the sum assured.
If you had a joint-life policy with your partner, and you died on the same day, the policy would only pay out once.
There are pros and cons for taking out single or joint life cover. However, choosing a single life policy can offer some benefits. Read on for three reasons that single life policies may be a good choice for couples.
3 reasons to consider taking out single life insurance
1.It increases the amount of cover you have in place
Taking out two separate single life policies can increase the total amount of cover you have.
Here’s an example.
Tom and Sarah take out a joint life term insurance policy with a sum assured of £100,000 over 20 years. Tom dies after 10 years, and Sarah receives a £100,000 payout. Their joint-life policy ends, so when Sarah dies five years later, no payout is made.
Now imagine Tom and Sarah each took out a single life policy with a sum assured of £100,000 over 20 years. When Tom died after 10 years, Sarah would have received the £100,000 payout. When Sarah died five years later, her policy would also have paid out £100,000 to her beneficiaries.
The couple would effectively have doubled the amount of cover they had in place by having single life policies rather than a joint life policy.
If you choose joint life insurance, the cover comes to an end when a payout is made (on the death of the first person). It means that the second, remaining partner will then be left uninsured.
If the second person then wants to insure themselves, they will be older and the insurance is likely to be more expensive – particularly if they have developed any medical conditions during that time.
Of course, one of the objections to single life rather than a joint life policy might be “it’s more expensive”. This is true as joint life insurance is generally cheaper than the cost of two single policies.
However, the flexibility to tailor individual policies to each party’s need can offset some of this cost, as you’ll see next.
2.It provides a cost-effective way to ensure you have the protection you need
If you’re on a budget, a joint life policy is likely to be cheaper and so might be the most sensible option. It may also be easier to keep tabs on one policy rather than two.
However, taking out two individual life insurance policies can be a cost-effective way of arranging the protection you need.
Choosing two single life policies means that each policy will be independent of the other. They could be provided by different insurers and each policy may have a different sum assured, appropriate to the individual.
If you stipulate a different level of payout on each death, you can be sure that you’re not paying more than you need to for the level of cover each individual needs.
In addition, insurers offer different rates for certain types of applicants. Choosing two single life policies also means that you can be sure you’ll benefit from the most competitive price for the protection you need.
It’s important to remember that taking out two single life policies will generally not be twice as expensive as a joint life policy. While you may pay a little bit more, you benefit from increasing the level of protection you have in place, and each person having protection that’s closely tailored to their needs.
3.You can keep your cover if your circumstances were to change in the future
While no one likes to think about separating from their partner in the future, it’s a fact that many couples do break up. And, trying to “split” a joint life insurance policy can be difficult in the event you separate or divorce.
In most cases, you can’t divide a joint life insurance policy. Some providers will offer a “separation option” which enables one party to take on the policy in the event that you separate.
What this often means is that you end up having to cancel your life insurance, and each individual has to take out new cover. As you’ll typically be older – and potentially in worse health – this can end up being more expensive,
If you each hold individual, single life policies then it makes separation or divorce easier. You can simply continue with your existing policy. All that you may need to do is to change the beneficiaries on your policy to suit your changed circumstances.
Get in touch with us for help
When it comes to getting the right life insurance, we can help. We have wide experience in helping customers to find the right life insurance and Critical Illness cover and work with dozens of the UK’s top insurers to ensure you get the most competitive rate for your cover.
We can also work with you to establish whether a joint life or single life policies may be more appropriate. We can provide you with the comparative costs of each and ensure that you tailor the amount of cover to each individual.
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