Part two of our five-part series, coming to you from our regular blogger Tracy Morgan, who today explains the benefits and disadvantages of joint life insurance policies.
Why should I consider joint life insurance?
Tightening the financial household belt may often be to the detriment of life insurance cover. We discussed previously the phenomenon of “illness denial” where people bury their heads in the sand and hope that serious, life-threatening illnesses will avoid them. However, when the worst-case scenario does occur, a partner or spouse will most certainly be devastated, both financially and emotionally. Taking out life insurance will protect those you love in such awful circumstances, giving you and your dependants some level of financial security if you were to pass away.
Is joint life insurance cheaper than single life insurance?
A joint policy is one affordable option to consider when, financially, life insurance appears an unwanted expense. A joint policy covers two people under one life insurance policy, but its cheapness reflects a few issues that policyholders need to bear in mind.
Looking at specific requirements as a couple will help determine if a joint life insurance policy works well for you.
Circumstances in which a joint policy works well is when both partners are working, contributing an income into the household. If one partner were to die, the loss of their income would have a devastating effect on household finances. The benefits of a joint policy outweigh not having a policy at all. Consider the following:
- A joint policy pays out irrespective of which partner dies
- With only one regular payment, it is often a cheaper option than paying for two separate policies, hence a more viable option in financial difficulties
- Provides peace of mind, and is an excellent solution for a couple with no children, and irrespective of marital status, but who have perhaps a joint mortgage, other debts and overheads to worry about
- Regardless of whether both parties are working, a joint policy provides cover for stay at home parents, covering those crucial but expensive childcare costs should the primary child carer pass away
The disadvantages need consideration before embarking upon a joint policy:
- A joint policy, although states the word “joint” will only payout on the first death, leaving a surviving dependant uninsured and possibly in difficulty to get a new policy
- If you and your partner go through a separation or divorce, the policy is indivisible
- If one partner stops paying monthly premiums, the policy will lapse, leaving both parties without insurance. If the split is amicable, one or both parties can renegotiate the terms of the cover.
What is the difference between joint life insurance and single life insurance?
To sum up, the only benefit to taking out a joint policy is financial. It is marginally cheaper than two single policies, but in the long term may not benefit both parties in the event of a death or if the parties separate.
The best advice is to examine both options, joint and single life insurance. If you are young, in good health and a non-smoker, your single life insurance policy may actually work out cheaper in the end and provide a great deal more flexibility and independence for each partner.
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