If you want to help make sure your loved ones will have financial security if you pass away, life insurance cover is the answer. But, if you’re part of a couple and you both need cover, should you take out single policies, or a joint policy that covers both of you?
With a single life policy, the insurer would pay out on the death of the policyholder and the policy would then lapse. With joint life insurance, however, the cover will apply to both policyholders and would pay-out either on the first or second death, depending on how the policy is set up.
Before you decide whether to take out single or joint life insurance policies, you'll need to decide what type of cover you need, and this will depend on your circumstances:
• Term Assurance: pays out a lump sum if you die within the agreed ‘term’ (ie. the amount of time you’ve chosen to be covered for). Term Assurance is typically taken out to protect a mortgage and, as such, can come with a level, or decreasing, sum assured - the latter reducing as you pay off your mortgage.
• Whole of Life Insurance: pays out a lump sum when you die, whenever that is - as long as you’re still paying the premiums.
• Family Income Benefit Insurance: pays out a regular income, instead of a lump sum, to provide ongoing financial support for those who depend on you.
You could also add critical illness cover to your life insurance policy, which means you’ll get a pay-out if you’re diagnosed with a serious illness and your claim is accepted. The type of conditions covered can include cancer, heart attack and stroke and will depend on the insurance provider.
Weighing up the benefits
Once you’ve agreed on the right type of cover, there are a number of other factors to consider to determine whether single, or joint life cover is best for you and your other half, including:
• Cost: a joint life policy may be less expensive than two single life policies. Level of cover - if your partner earns more than you might want them to have a higher level of cover, since the financial impact of their death would be greater than yours. In this respect two policies may be better as they will have different sums assured.
• Existing cover: either, or both of you may have existing life cover through your employer, or an existing plan. It's important to check what's already in place so that you have a true picture of your protection shortfall. You don’t want to pay for something that’s already covered.
• Your relationship: It's not necessarily something you want to think about, but some insurers include a separation benefit. This means if your relationship breaks down during the policy term, you could cancel it and start two individual policies without having to provide additional medical information.
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