How to get joint life insurance
Protection for both you and your partner.
When you’re building a life with someone, it only makes sense to seek out a life insurance policy that can cover you both. With life insurance for couples, the cost of coverage for two is often not much more than the cost of coverage for one.
What is Joint Life Insurance?
Joint life insurance is a life insurance plan that allows you to take out one policy for two people -- typically partners or spouses. A life insurance for couples policy will then cover both people under one policy, often making it easier and more affordable than taking out two separate policies.
How does Joint Life Insurance work?
By taking out one policy to cover two people, life insurance for couples allows partners to go in on coverage together. The policy will typically pay out when the first person dies, and after that, the policy ends. However, this will depend on what type of policy you purchase: a first death policy or a second death policy.
What is Single Payout Joint Life Insurance?
Both first death and second death policies are single payout policies, meaning that they only pay out once. You can choose whether the policy pays out when the first person dies or when the second person dies, but it will not pay out for both.
Differences of First Death and Second Death Joint Life Insurance
- First death joint life insurance means that your policy pays out after the first person dies. The policy ends here, meaning that the second person no longer has life insurance coverage, and the policy will not pay out when he or she dies. This type of life insurance is best for couples who want to protect against income that would be lost if one of them were to die. The downside to first death policies is that if the second partner dies prematurely, it can often leave dependents without any additional means of support. In order to combat this, the surviving partner can take out their own single life insurance policy after the first partner dies.
- Second death joint life insurance means that your policy pays out only after the second person dies. This means that the policy will not pay out when the first person dies. This type of life insurance is often used to cover estate taxes and provide a legacy to one’s heirs. The downside of second death policies is that they will not replace lost income if the first partner dies prematurely. Second death policies are often designed for wealthy families
Joint Life Insurance Compared with Single Life Insurance
The main reason to take out a life insurance for couples is that it’s typically more affordable than taking out two single life insurance policies, and it covers both people.
However, life insurance for couples policies will typically only pay out once. For a family who wants additional protection and a double payout (a payout after each spouse dies), it might be a better idea to take out two single life insurance policies, one for each partner.
Partners who are equal earners tend to opt for two single life insurance policies, as the loss of either of their incomes would be equally damaging to the family. When one partner earns significantly less than the other, it’s possible to take out a life insurance for couples plan with different coverage levels for each partner. These types of policies typically have lower premiums.
Pros of Joint Life Insurance
- More affordable. Taking out a joint life insurance policy is almost always more affordable than taking out two separate single life insurance policies. If you want low premiums, life insurance for couples is the way to go.
- A payout will be issued regardless of who dies first. If you have a first death policy, your payout will be issued regardless of whether the first person who dies is the breadwinner or not. With a second death policy, the payout will always be issued once both partners have passed.
- If one partner is in poor health, joint coverage might be a better option. If you have a health condition that prevents you from getting single life insurance, a life insurance for couples policy may offer you better coverage at a more reasonable price if your partner is in good health.
Cons of Joint Life Insurance
- Less overall coverage. While joint life insurance can offer better coverage than a single life insurance policy for one partner, it offers less coverage than taking out two single life insurance policies. There will always only be one payout. While the surviving partner can take out their own single life insurance policy after the first partner dies, the cost of taking out life insurance at an older age will be significantly higher.
- Partners share the same terms and conditions. With a joint life insurance policy, both partners share the exact same policy with the same terms and conditions. If one partner has more specific needs or special circumstances, they will not be taken into account unless he or she takes out their own separate policy.
- If both partners die at the same time, there’s only one payout. If both partners were to die at the same time (for example, in a car accident) there would only be one payout even though two incomes are lost. Because both partners passed simultaneously, there will be no chance for a remaining partner to take out a new single life insurance plan to ensure double coverage.
- If partners split, the policy could be lost. While it is possible to design a joint life insurance plan that protects against divorce and separation, many policies will not offer the option to split coverage in the case of divorce and the policy may be lost completely.
Do we have to be married to take out Joint Life Insurance?
No. You do not have to be married in order to take out a life insurance for couples. It is possible for partners in a civil union, unmarried couples who live together, or even business partners.
Couples must prove insurable interest to the insurance company in order to take out a life insurance for couples together. This means that they must show that they have joint liability in regards to shared assets, debts, or other obligations. This can be a lease or mortgage shared between both partners, bills under the names of both partners, shared investments, shared debts, children between the partners, or a shared business.
What happens in the case of divorce?
It is important to make sure that your insurance provider offers the option to split your policy into two separate life insurance policies in the case of divorce. This usually comes in the form of optional riders or divorce clauses that allow the right to split. Sometimes these clauses require that the couple be divorced for a certain amount of time before they’re given the right to split the policy.
How much does Joint Life Insurance cost?
Because they offer a single payout, these are cheaper than purchasing two single life insurance policies. Premiums can be as low as £10 per month for young, healthy couples. While it is a great value, it’s worth weighing the pros and cons and opting for the higher premium of two single policies if you think your family could use two payouts.