Why get joint life insurance?
Because they share responsibilities with one another, like a mortgage or a family, couples and friends frequently purchase life insurance.
If the insured person passes away while the insurance is in effect, the policy will pay out. Two main categories of life insurance exist:
- Whole-life protection pays you a predetermined sum upon your death, provided you continue to pay the premium (some policies stop taking money when you reach 90).
- Term insurance only provides coverage for a specific number of years (the term).
Family income benefit is available as a one-time payment or a recurring monthly payment.
We explore the operation of joint life insurance and the relative merits of a combined policy over two individual ones.
What is joint life insurance?
When two people purchase joint life insurance, the policy pays out if and when the first of the couple passes away during the policy’s term.
If the second individual passes away soon after, the coverage expires and is no longer valid.
For any type of term insurance, you might have a joint policy.
A couple may have a joint level or growing term policy to give a lump payment to care for the family in the event of the death of one parent and a joint declining term policy to finance their mortgage.
If your life insurance policy has a terminal illness provision, you will be paid out if your prognosis is fewer than 12 months. You can organise your affairs as a result. If you live longer than expected by the doctors, you are not required to pay anything back.
What are the disadvantages of joint life insurance?
When a couple buys joint life insurance, the payout occurs if and when the first person in the pair passes away during the policy’s term.
The insurance coverage lapses and is no longer valid if the second person passes away shortly after.
You may have a combined coverage for any sort of term insurance.
In the event that one parent passes away, a couple may obtain a joint level or increasing term insurance to provide a lump sum for the family’s care and a joint declining term policy to pay for their mortgage.
If your life insurance policy has a terminal illness clause, you will be compensated if the expected length of your life is less than 12 months. As a result, you can arrange your affairs. You are not compelled to make any repayments if you live longer than the physicians had anticipated.
What is single life insurance?
Single-person life insurance only protects the person who is insured. It will pay out if you pass away or, more frequently, if you are told that you have a terminal condition and will pass away within the next 12 months.
Three variables are used to determine the premium:
- Your age – the older you are when you take out the insurance, the more expensive the premium
- Your health – you must tell the insurer of any pre-existing medical conditions or health problems and these may increase the premium
- Your lifestyle – if you drink heavily, smoke, take recreational drugs or do dangerous activities, your premium will be higher.
Also, by setting up your life insurance in trust, you can prevent it from increasing the value of your estate and making it liable for inheritance tax. This might also make it easier to get access to the money.
Joint vs single life insurance: which is better?
Assume a couple with a mortgage and kids took out level term life insurance for an additional £250,000 in addition to decreasing life insurance to pay the mortgage.
Imagine both of them passing away in a car accident while there was still £250,000 in the mortgage. The rewards are contrasted as follows:
Joint Life Insurance Policy
- Joint decreasing term life insurance: £250,000
- Joint level term life insurance: £250,000
- Total: £500,000
The mortgage would be paid off and the children would get £250,000.
Two Single Life Insurance Policies
- Single decreasing term life insurance (person 1): £250,000
- Single decreasing term life insurance (person 2): £250,000
- Single level term life insurance (person 1): £250,000
- Single level term life insurance (person 2): £250,000
- Total Payout: £1m
The mortgage would be paid off and the children would get £750,000.
Is joint life insurance cheaper?
In March 2023, LifeSearch published some rates based on a couple searching for level protection paying out £250,000 over a 25-year period who were both 32 years old and non-smokers.
A monthly premium of £18.88 was charged for a joint life insurance policy with a maximum payout of £250,000.
A combined monthly premium of £19.42 was paid for two single life policies with a face value of £250,000 each and a maximum payout of £500,000.
So, if both parents passed away, a family would receive an additional £250,000 for an additional 54p per month. For little than 3% more, you can potentially receive 100% more benefit.
Each person or couple would have to weigh the advantages and disadvantages of a joint or a single life insurance policy to determine which was best for them given their unique situation. Yet since this is a significant life choice, it could be wise to consult a specialist.
What is the difference between joint life and dual life?
Dual life insurance, also known as joint life second death insurance, is a slightly different type of coverage that only pays out if and when the second person passes away throughout the policy’s term.
Those who use life insurance to pay a significant inheritance tax liability are typically the only ones with dual life insurance policies.
When both parties have passed away, the policy pays out, and the payout is typically used to pay inheritance tax on the estate as it was distributed to relatives or friends.
What is joint term life insurance?
- Reducing term life insurance is frequently connected to a debt, such a mortgage obligation. In this way, as you make monthly payments towards the balance due, the amount paid out if you pass away during the term decreases.
- If you pass away within the term, level term life insurance pays you a predetermined fixed amount.
- The amount paid out if you pass away during the term increases with an annual term increase, typically in line with a measure of inflation (CPI or RPI).
Combined joint life insurance and critical illness cover
Critical illness cover (CIC) can be added to joint and single life insurance plans, or you can purchase critical illness protection as a separate policy.
If you are identified as having one of the 100+ diseases or disorders on the CIC list, you will receive payment. Regarding the level of severity needed before payments are given, various insurers have varied perspectives. It could be better for you to consult a professional.
If money has already been spent on critical illness, a combined life and critical illness policy will also lower the ultimate sum paid out upon death.
The amount paid out upon death would remain the same under separate plans.
Mummy Insurance helps you compare prices from the UK’s top insurers for life insurance, critical illness cover, income protection and more. We help guide you through the whole process with our advised service. Get a free quote today with Mummy Insurance to protect yourself & your family.
