When two people decide to share their lives together, whether through marriage or a long-term partnership, they often think about the future — buying a home, raising children, and making plans for retirement. But what would happen if one of you died at some stage?
Many people look to protection, such as life insurance, which can also be purchased as a joint policy. In this article, we’ll explore the reasons why joint life insurance is a must-have for couples and the benefits it can provide.
What is joint life insurance?
Joint life insurance is a single insurance policy that covers two people, usually married couples or a long-term relationship. It pays out a lump sum to the surviving partner upon the death of the other. This type of policy provides a financial safety net, ensuring that the surviving partner is not left with any burden alone.
How does it work?
Joint life policies work in two ways:
- First death: where the policy pays out a cash lump sum after the first death in the couple. This payout can help the surviving party cover living expenses, mortgage payments, and other financial obligations, providing immediate support during a difficult time.
- Second death: where the policy pays out once both partners have passed away. This type of policy can be beneficial for couples who want to ensure their children or other loved ones receive financial support.
Once you take out a policy, you’ll be required to pay a premium (monthly or annually) to your insurer to keep the policy active. The cost of the premium will depend on several factors, including the age and health of both policyholders, and the amount of cover desired.
Which type of policy do I need?
There are two main types of life insurance — whole life insurance and term life insurance — which can be purchased under a joint policy.
- Whole life insurance is a type of permanent cover which pays out regardless of when you or your partner passes away. As long as the premiums are paid, the policy will remain active. Both the cost of the premiums and the cover amount remain fixed throughout the policy.
- Term life insurance, on the other hand, lasts for a set amount of years as agreed upon by the insurer. If one or both partners pass away during the term, the policy pays out a lump sum. However, if neither partner passes away by the end of the term, no payout is made, and the policy expires. Because a payout is not guaranteed, term cover is often cheaper than whole.
The type of cover you choose will depend on your plans and financial circumstances. If you want cover for a certain amount of time, term life insurance may be your preferred option. Whereas if you require long-term cover, whole life insurance may be a more suitable option.
Why should I buy joint life insurance?
Owning joint cover can offer a range of benefits for you and your partner or spouse, such as:
- Cheaper cover: If you and your partner are looking for cover you may be tempted to take out individual policies. However, joint life insurance may be cheaper as you only need to pay for one set of premiums instead of two.
- Two policies in one: Joint life insurance can make it simple for you to manage your finances, as you only have one policy to keep track of. This can make it easier to deal with claims or policy changes.
- Peace of mind for you and your partner: Knowing that your partner will be financially supported in the event of your death can provide a great sense of reassurance. It allows both partners to focus on their lives together without constantly worrying about potential financial hardship.
- No burdens to leave behind: If you and your partner share finances such as a mortgage, a death could leave the surviving partner with significant financial burdens.
- Support for your children: If you have children or dependents, a payout could provide essential support for their future. This could mean helping them to buy their first home or to support your grandchildren.
How much cover will I need?
One of the biggest questions people tend to think about when buying is how much cover they will need. Naturally, you and your loved ones will want enough cover to replace any income lost in either partner’s absence. This includes financial commitments such as:
- Living costs
- Utility bills
- Rent or mortgage payments
- Child support
- Debt or loan repayments
It’s generally recommended to have enough cover for 10 times your annual salary, though this can vary based on your circumstances and financial obligations. In the end, it’s better to have sufficient cover to not leave your loved ones with less than they need in a difficult time.
If you’re looking to protect yourself and your partner from financial hardship in the event of death, it’s worth considering joint life insurance. Whether that’s as a whole life or term life policy, you can make sure your loved ones are supported if the worst happens.
