If you are young, free and single, you might not see much need for life cover. However, as soon as you acquire a partner, and especially when you have children, things change.
If they depend on you, as the main breadwinner and largely depend on your income to cover the mortgage or living expenses, then the case for life insurance is proven.
In return for a monthly premium, it will provide a cash lump sum to your family in the event of your death. It means your loved ones need not suffer financial misery as well as the pain of bereavement.
Most of us would agree that life insurance premiums are money well spent. But how much will you actually need to spend? The answer will depend on your age, profession, lifestyle and health (and consequently the risk of a claim) and on the level of cover you have. It is likely you will pay around twice as much for £1 million cover as you would for £500,000.
You must have adequate cover in place – but times are challenging and money is tight for many people. One of the ways to reduce the cost of life insurance protection is to opt for a joint policy.
What exactly is a joint policy?
Only providing cover for the main earner in the family is an outdated idea. Both partners must have adequate cover.
The need to replace the main breadwinner’s income is obvious. But even if they are unwaged and a full-time carer, cover is still essential for a partner. If you suddenly had to pay for an outsider to do the round the clock work routinely done by a mother, father, housewife or househusband the figures involved would probably be higher than most incomes.
But two life insurance policies will mean two premiums to pay each month.
A Joint cover policy can cut the cost of providing protection for you both. The name explains how it works. Both partners are covered by a single policy, which pays out if one was to die during the term. There will usually only be one payout, when the first partner dies. With joint policies the surviving partner is no longer insured following a claim. This means that costs can be substantially reduced, while still providing the level of security required.
So, should you go joint?
One Joint Life plan should be cheaper than two single plans, and it can be easier to arrange, with a single form to fill in. But there are some snags to consider.
Divorce and separations are a fact of modern life, and a proportion of relationships don’t end on a harmonious note. This can leave one partner paying for cover they no longer need, either partner discovering that any payment goes to an ex, rather than to themselves, and both faced with the need to rearrange their cover later in life when costs will inevitably have increased.
There are solutions. Some insurers offer separation options on newer policies, which can be an important plus if you need to call on them, but the problems might not stop there. If you are thinking about a whole of life policy, it could be more difficult to put a joint policy into trust, which might mean the taxman taking a share of the payment.
Plus, if one partner is young, hale and hearty, and the other older and in less than perfect health, premiums will be based on the risk presented by the older partner. This might mean that the joint cover works out very nearly as expensive as individual cover based on the risk presented by each individual.
What should you do?
Whether Joint Cover or individual policies are best for you will depend on your individual circumstances – and even if the savings seem clear, you should still tread carefully.
Make sure you really have the cover you need and remember that life moves on. It can be vital to review your cover regularly. If your family circumstances change, if there is a parting of the ways, or if you need to start thinking about the future, inheritance tax and preserving family wealth, expert help is vital.
At Continuum we can help you look at all types of life insurance, whether you could save money with a joint policy – and whether you should.
As independent financial advisers we offer insurance products from a fair analysis of the insurance market, thechances are that we can help you find cover that may well be a better answer for your needs – and to pay less for it.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Protection products you should seek independent financial advice before embarking on any course of action.