Why joint life insurance isn’t better than individual insurance policies

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joint life insurance

joint life insuranceWhen taking out life insurance to cover our mortgage or protect our family, most couples sign up for ‘Joint Life’ policies. But is this the best option?

What is a Joint Life Policy?

A Joint Life Policy is a life insurance policy that insures both you and your partner on the same plan.  It is usually set up on a ‘first death’ basis, which means that if one of you were to die during the term of the plan, it will pay out a lump sum to the surviving partner.

Why take out a Joint Life Policy?

Most people assume that it is the most appropriate thing to do – it seems straightforward to have just one plan, and you would assume that it is the most cost efficient solution.

This is not the case. Let’s look at two different scenarios:

  • A couple, both aged 32, take out a Joint Life Insurance policy which will pay out £250,000 if one of them dies before age 65. This would cost around £28 per month.
  • For £3 more per month, they can have an identical policy each.

But why do you need a policy each?

  • Using the above example, you get double the cover for only a fraction of extra cost.  In the unthinkable event that you were to both die, your family would receive £500,000 (as opposed to just £250,000 with the joint policy).

  • Again, concentrating on the negative (but unfortunately that’s an important part of financial planning!) if you and your partner were to break up and go your separate ways,  you could take your policies on with you.  If you had a joint policy, you would probably end up cancelling it.  Bearing in mind that life insurance gets more expensive the older you are when you apply, it is likely to cost you much more if you wanted to replace it!

If, like most couples, you have a joint policy, it is definitely worth looking into the option of replacing it with a policy each.  Two plans are definitely better than one!

Henrietta Oxlade is an Independent Financial Planner with Radcliffe & Newlands and MyFamilyClub’s in-house finance sage! She has been advising individual clients since March 1988, which is why many of her clients consider her part of the family. If you want to contact Henrietta, email us on [email protected] and we’ll put you in touch.