Couples have a lot of things in common, and that can include financial commitments like bank accounts and mortgages. However, when it comes to life insurance it can make sense for each partner to have their own separate policy.
SINGLE VERSUS JOINT POLICIES A ‘single’ life policy provides cover for that person only, and pays out the amount of cover provided under the policy if the insured dies during the term of the policy. By contrast, a ‘joint’ policy covers two lives, normally on what’s referred to as a ‘first death’ basis. This means that the policy pays out if during its term one of the policyholders dies. As the policy is designed to pay out only once, it will end. So, in this case, the surviving partner would no longer have any life cover under this policy. If instead each had their own policy, the survivor would still have life cover in place. It’s also important to consider what might happen if there was a joint policy in place and the relationship breaks down. As the policy cannot be split, each would need to take out a new policy. This could mean that their premiums would be much more expensive, as the cost of insurance increases with age. People need to carefully consider their options, those taking out cover for Inheritance Tax Planning (IHT) could benefit from a joint policy.
GETTING THE RIGHT COVER IN PLACE Whilst one joint policy could be more affordable than two single policies, depending on personal circumstances, it makes sense to think about each partner’s life assurance needs separately. With many families these days relying on two incomes, it can make financial sense for each partner to have their own policy in place. That way, they can each tailor the amount of cover and the length of the term to their own specific needs. This can be particularly relevant where the partners are different ages and in different states of health. There’s a lot to think about, and professional advice can help ensure you make the right choice.