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Should I get an individual or joint life insurance policy?

Couple standing on grassThose considering a joint life insurance policy are often married, or co-habiting, couples with dependants they want to protect should they die, or suffer a critical illness.

But joint policies can be useful for any kind of interdependent relationship, such as business partners, where if one of the partners dies the other will face financial pressure.

What do I get for my money with a joint life insurance policy?

Joint life insurance policies usually pay out a lump sum or monthly income after the first death but then cover for the surviving partner is ended and no further payment will be triggered when they die.

Because a joint policy covers two people, and the probability of the insurance company having to pay out a death claim is higher, the premiums will be more expensive than taking out individual cover for one person.

In the past, to try and save money on premiums, people often took out an individual life insurance policy for the main breadwinner in the family.

But these days, most families rely on two incomes and so both need to be protected if the surviving spouse and children are to manage in the event of one of them dying.

Taking out a joint life insurance policy is a good way to do this for you and your partner and will usually be cheaper than taking out two individual policies - but there are drawbacks.

So if a joint policy is cheaper, why bother with two individual policies?

Security - With a joint policy, a payment is only made on the first death. At this stage the surviving partner can choose to take out their own individual life insurance policy, but if they are of advancing years or have health problems, this could be expensive.

Double cover - In the case of a husband and wife, if both were to die together, for example in a car crash, any children left behind would only benefit from one payment. If two individual policies had been taken out, they would have got twice the cover.

Tax issues - Individual policies can be geared to sidestep inheritance tax. Any payments can be easily put in trust for children, so they will not count towards the inherited estate. This is more difficult with joint life insurance policies.

Separation - Probably second on the list of subjects most couples might not want to discuss, behind death, is break-ups. But joint life insurance policies can be difficult to divide up in the case of divorce or separation and can lead to problems if one person decides they don’t want to continue paying the premiums. Another common bone of contention is who inherits the payments in the event of death, especially if new partners and children are involved.

Key points to be aware of on life insurance policies

  • The advantages of joint life cover are that it pays out, regardless of which partner dies, and is cheaper than taking out two individual life insurance policies. It may be good for young couples who are trying to save money on premiums, or for business partners.
  • Joint cover offers extra protection over taking out just one individual policy for the main breadwinner. Even where one person may stay at home to look after the kids, it is usually worth having some cover for them as if they were to die, childcare costs could be a significant burden.
  • Where the salaries of each partner in the home are vastly different, it may be worth taking out two individual policies - one each. These can be tailored to provide adequate cover for each person.
  • Taking out two individual policies of the same amount will cost more than the equivalent joint policy, but provides double the cover.
  • For further information read Confused.com’s online guide to working out how much life insurance you need or use our life insurance glossary to better understand the different terms used.

Find out more about life insurance