Term life insurance providers. Single Policy VS Joint Life Insurance Cover, MoneySuperMarket

Life insurance can give you the precious peace of mind of knowing that any dependents will be financially secure in the event of your death. Joint life insurance.

But if you’re in a couple or partnership, should you opt for a ‘single’ or ‘joint’ policy?

Before deciding whether a single or a joint policy is right for your situation, it’s important to understand the differences between these two kinds of plan.

If you are in a relationship it might seem obvious to take out a joint policy, but this is not necessarily the best option. So here’s a look at the pros and cons of both single and joint policies.

A joint policy or separate plans?

If you opt for joint life cover, you and a partner will be protected by a single plan on the same terms and conditions. But if you take out two policies, these will be entirely separate – so if a claim is made on one, it will have no impact on the other.

More people tend to opt for single level life insurance at 58.4%, while joint life insurance is slightly less popular at 41.6% *.

Before deciding whether a single or a joint policy is right for your situation, it’s important to understand the differences between these two kinds of plan.

The pros and cons of single level life insurance

One of the main benefits of single, separate life insurance policies is that there would ultimately be two pay-outs if you and your partner died while covered. Another benefit (or perhaps a disadvantage) is that the responsibility of your life insurance policy is yours and yours alone. If you let your policy lapse you will only have yourself to blame and won’t be relying on anyone else to uphold their end of the bargain.

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Having single level life insurance also means that if your relationship were to break down, your life insurance policy would remain unaffected.

However, the main disadvantage to having single level life insurance is the cost: single level life insurance is more expensive than joint life insurance, due to the increased level of cover.

MoneySuperMarket data for January to April 2018, showing the average cost of life insurance premiums without critical illness cover by age group. Correct as of April 2018.

The pros and cons of joint life insurance

The main benefit of a joint life insurance policy is that it is cheaper. If you’re on a budget and are in the position to get a joint policy, this might be a good option for you and your partner.

Joint policies might also appeal to couples who don’t have children; they might count each other as their main dependent, and so would perhaps see more benefits from having a joint policy to cover them if one of the couple were to die before the other.

If you opt for a joint policy, it’s important to remember there will only be one pay-out. The pay-out may occur after one of the couple passes away (if you have a first death policy), or when both members of the partnership have passed away (second death policy). If both members of a couple were to pass away at the same time, their dependents would only receive one lump sum payment from the policy.

If, however, both members of a couple had taken out individual life insurance policies, each policy would make a pay-out upon their death.

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Another potential downside of a joint policy is if a relationship breaks down, you can’t simply ‘split’ the policy. That means if one ex-partner decides they don’t want to pay their share of the premium, the policy would probably cease unless the other partner took on the full burden of paying.

There could also be issues over who is entitled to any pay-out from a joint policy, particularly if one of the former partners remarries and has children with their new spouse.

Another potential issue with a joint life insurance policy is that, if you have a first death policy and one of the partnership dies, the remaining person will no longer have any cover. If that person wanted to take out a new life insurance policy, they might face higher premiums due to advanced age or deteriorated health.

For example, the average price of a level term life insurance premium (with critical illness cover) would be £12.60 for someone under 25, while the same policy would cost £83.09 for someone aged 46 to 65.

Having separate policies avoids these sorts of issues. If a relationship does end, each partner has their own cover and can protect their dependents as they choose.

MoneySuperMarket data for January to April 2018, showing the average cost of life insurance premiums for level term policies by age group. Correct as of April 2018.

The importance of writing your policy ‘in trust’

Writing your life insurance policy ‘in trust’ simply means you are protecting any pay-out from the tax man – any payment on death will fall outside of your estate for inheritance tax purpose.

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Current inheritance tax rules state that, if the value of your estate on your death is above £325,000 (if you’re single or divorced) or £650,000 (if you’re married or widowed), then everything you own above this threshold will be liable to inheritance tax at 40%. That includes your home, any savings, valuables, and any life insurance pay-out that hasn’t been written in trust.

So, if for example, your estate is valued at £425,000, your inheritance tax bill will be £40,000, which is 40% of the £100,000 above the £325,000 threshold.

Having your life cover written in trust also means the executors of your will won’t have to apply for a grant of probate before the policy will pay out, which can take several months.

The importance of comparing quotes

Whether you opt for a single or joint policy, it’s essential to compare life insurance quotes from lots of different providers to ensure you find the most competitive deal possible. Premiums can vary widely depending on who you go to, so always do plenty of research before buying.

Finally, remember that although two separate policies will provide you with greater cover overall, if premiums aren’t affordable, having a joint policy is much better than not having life insurance at all.