How does joint life insurance work
Joint life cover works much like standard life insurance. You choose how much you want to be covered for, and for how long. If you or your policy partner dies during this time, your loved ones get a cash payout.
There are 2 types of joint life cover to choose from:
First death policies pay out on the first policyholder death. The second policyholder gets the payout to use however they want. But after that, the policy ends, and the survivor is no longer covered. This means if they still want life insurance, they have to get a new policy.
These are a good choice for couples who share responsibility for the bills. The payout ensures that the survivor isn’t left struggling to make ends meet if their partner dies.
Second death policies pay out when both of you die. This could be years apart or at the same time but has to be within the cover term of your policy to get a payout. If 1 of you dies, but the other survives after the end of the policy, then they or their beneficiaries don't get a pay-out.
These are ideal for couples who each earn enough to support themselves and their loved ones should their partner die. Here the payout is usually used to support their children if, tragically, both their parents were to die.
Single vs joint life insurance
Here’s a breakdown of the pros and cons of joint life insurance:
Pros of joint life insurance:
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They’re usually cheaper than two separate life insurance policies
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No matter who dies, your loved ones will get a pay-out. As you’re both insured, you’ll know that whoever is left behind will be provided for. With single life cover, you’d each need a separate policy to make sure your loved ones get a pay-out no matter who dies.
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Having a single policy means one lot of admin, making it easier to keep track of what you’re covered for, when you need to pay, and how much your pay-out is.
Cons of joint life insurance:
- You only get 1 pay-out as joint policies only pay out once. If you get 2 separate life insurance policies for you and your partner, your loved ones get 2 payouts if you both died. It's often more expensive as you're paying twice.
- Separating could end your policy because to be covered, both policy holders have to share a single address. If you separated, you have to end your policy. Even if you were several years into the policy, you lose everything you’d paid in so far.
Joint policies are ideal if you’re in a stable relationship and want to make sure your partner, or children, are cared for if either of you pass away.
Single policies are good for ensuring your loved ones are financially secure whatever happens. If you and your partner both died, 2 payouts could pay off your mortgage and support your children. If you and your partner separated, you’d also be able to keep your policy going.
Which is the best policy for me?
Before you choose a life insurance policy, there are some key things to consider to help you select the best policy for you:
- Your budget
- Your cover level
- Your future
Your budget - how much do you want to spend in payments? Joint life insurance should work out cheaper than 2 individual life policies. But you still need to balance this with your budget – for instance, whole life policies are more expensive than term policies.
Your cover level - how much life insurance cover do you need? You should take time to calculate your joint monthly expenditure, including your mortgage payments and all your outgoings. Look at each of your earnings and think about whether you both need the same level of cover.
Your future is also important. Review your policy/policies from time to time, especially if your circumstances have changed. A relationship breakdown can bring joint life insurance policies to an end, in which case you might decide to get a single life policy.
Need more help?
I'm a new parent, should I think about joint life insurance cover?
It’s common for new parents to take out joint life insurance cover. Your little one is going to be financially dependent on you and your partner for a long time to come, and bringing up a child is costly.
If one of you were to die, losing part of the family income could have a big impact, even if it’s not the main breadwinner who passes away. Whoever is left behind might also have to spend more on childcare costs as a single parent.
Can a joint life insurance policy be put in a trust?
Yes, a joint life insurance policy can be placed in a trust. If you die during the term of your life insurance, the payout forms part of your estate. This is the sum total of everything you leave behind. Writing your life insurance policy in trust means your beneficiaries can get the full life insurance payout tax-free, even if the estate is over the £325,000 inheritance tax threshold.
Putting your joint life insurance in trust should also allow your loved ones to get the payout faster. This is because funds from the policy can be paid directly to trustees rather than going into the estate.
What could joint life insurance cover?
Your family can use the payout from a joint life insurance policy to cover a mortgage or general living costs.
Joint life insurance pays out only once, after one partner dies or is diagnosed with a terminal illness, where they have a life expectancy of less than 12 months.
What our life insurance expert says
Joint policies can be a smart way to save on your life insurance. But some only pay out once, so think about whether they're right for you before signing up. It costs a little more, but the added peace of mind of 2 payouts can often justify the cost.
Louise Thomas
Life insurance expert
What other types of life insurance are there?
Mortgage life insurance
pays out an amount that decreases over time, usually in line with your mortgage
Critical illness cover
pays out a lump sum if you're diagnosed with an illness covered by your policy
Income protection insurance
covers your bills if you're injured or ill and are unable to work. Short term policies and longer ones available
Health insurance
covers the cost of private medical care, helping you avoid NHS waiting lists to get the cover you need, quickly
Life insurance guides
Joint life insurance explained
Still confused about joint life insurance? Learn all you need to know here
Writing life insurance in trust
Looking to avoid tax on your pay-out? Then writing it in trust may be for you
How to change life insurance policies
Need to update your policy? Here's some quick tips on how to do it
Could your ex get your life insurance pay-out?
Find out how to review your policy to check who'll get your pay out
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