A Single vs a Joint Life Insurance Policy – what are the options for couples considering life cover? Cambridge Mortgage Broker Life Insurance Joint Single
October 26th, 2017
Life insurance should be considered part of a person’s financial plans if a couple are married or co-habiting. Life insurance is taken out for a specific term with monthly payments either for a level or decreasing sum assured and is designed to pay out to loved ones if the insured person passes away during the term of the policy (exceptions apply). The level of life cover varies from applicant to applicant depending on their mortgage balance or how much cover an applicant would like to cover themselves for in the event of unforeseen death.
For Decreasing Term Life Insurance – where the starting sum assured decreases in line with a repayment mortgage as the term progresses – the statistics show that 70% of couples who take out life insurance choose a joint policy and 30% are single policies. For Level Term Life Insurance – where the life sum assured remains the same throughout the term of the policy – the statistics show that 60% of couples take out single policies whilst 40% take out joint policies.
Usually a joint policy has a lower monthly premium cost rather two single policies. Joint policies can be taken out on a “first death” basis – a lump sum is paid out when the first applicant on a joint policy passes away (the more popular option) or on a “second death” basis – where a lump sum is paid out when the second applicant on a joint policy passes away. Usually a “second death” policy is considered a ‘Whole of Life Policy’ which pay out “when” you die not “if” you die and is more popular for applicants of high net worth for inheritance tax planning purposes.
An advantage to having two separate single life policies is that if the first applicant dies during the term of the policy and it is on “first death” basis, the second applicant may need to take out a new life insurance policy rather along the term which could mean that as the applicant has aged or many have suffered from medical conditions since the start of the previous policy, the premiums could be much higher than before. In addition, if a couple take out a joint “first death” life insurance policy and they separate or divorce during the term of the policy, new policies may need to be taken out in the future with similar issues in achieving competitive premiums or finding an insurer offer to an applicant cover.
Tax implications need to be considered when choosing either two single or one joint life insurance policy. If an applicant passes away during the term of a “first death” joint policy, the applicant’s surviving spouse or partner on the policy receives the lump sum of cover. For inheritance tax planning, the situation is different and therefore it is recommended that the policy is put in trust.
For a joint or two single life insurance quotes, contact one of qualified and experience Advisers today to discuss your requirements today!