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Guide

Joint life insurance explained

If you’re looking to buy a joint policy, you may be wondering how it works and what the benefits are. This guide can help you pick the best option.

What is joint life insurance and how does it work?

Joint life insurance is a life policy that covers two people, such as a couple. An individual policy pays out to dependents in the event of death or illness, such as your children. Joint life insurance makes a pay-out to the surviving partner, should the other die. The pay-out varies from policy to policy, so it’s important to consider the level of coverage required ahead of purchasing.

On the death of the first partner, the surviving partner will no longer be covered. So if they are still covered, they will need to take out a new insurance policy. What is best for them will depend on their situation. For example, whether they have children or a mortgage to pay off. Products like individual life insurance and income protection can cater to different needs. Although you can get products that pay out on a second death too.

Is joint life insurance for married couples only?

No, joint life insurance isn’t exclusively for married couples. It can include a range of partnerships, including business ones. It’s common for policies to cover people living in the same household. But it’s best to research the terms and conditions of the policy before you buy.

Joint life considerations

The level of coverage necessary will depend on your circumstances. For example, if you’re in a couple and have children, you can get cover to protect them. This ensures their quality of life isn’t affected in the event of a death. But a joint policy will only pay-out to the other policyholder. A single policy offers more flexibility on who the beneficiary can be. Taking out two policies to ensure a surviving partner remains covered could be a better option. Below are a few questions to help:

• Do you both need the same level of cover?
• Is cost a decision-making factor?
• Who would you like to receive the pay-out?

Joint life insurance policies can’t be split and taking out single policy later in life can cost more. So if you separate, speak to your provider to find out the next best steps.

Is joint life insurance cheaper than two single life policies?  

Joint life insurance can be more cost-effective for those on a budget. But don’t let this be the driving force behind your decision. For example, if one partner earns more, this may lead to a vast difference in the amount of cover each requires. In this instance, two single life policies might be a better option.

But if you live together, need a similar level of cover and have children, joint life insurance could be the best option. Other factors may lead you to this decision too.
Another benefit of having a joint life policy is that pay-out is given regardless of who dies first.

What is a first-to-die life insurance policy?

If an individual covered under a joint policy dies, first-to-die ensures the surviving policyholder receives the pay-out (as long as the cause of death is covered). Afterwards, the surviving partner won’t be covered. They would then need to take out another policy like whole of life or term life.

Should joint life insurance be put in trust?

If your estate is worth over £325,000, beneficiaries will be charged inheritance tax upon pay-out. This is usually 40%. To avoid this, you could write your insurance policy in trust. This means the policy isn’t classed as being part of your estate. You can find out more about our joint life cover, and get a life quote here.

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