Joint Life Insurance

What is joint life insurance?

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Find out whether a joint life insurance policy is the right option for you.

Joint life insurance provides cover for two people. It’s an alternative to taking out two separate policies, and can often work out cheaper. In most cases, once one of the two people passes away, the whole policy comes to an end, and the final pay out is made.

How does joint life insurance work?

Broadly speaking, there are two types of joint life insurance policy:

‘First death’ policy – A life insurance pay-out is made after the first death that occurs. A second payment will not be made upon the second death, so the survivor will no longer have life insurance cover.

‘Second death’ policy – A life insurance payment is made after both members of the couple have passed away.

Life insurance types infographic
Once a pay-out is due on a life insurance policy, there could be potential inheritance tax implications. One option to help sidestep a potentially large inheritance bill would be to set up your life insurance ‘in trust’.

Could I take out a single policy, too?

If your other half passes away and your joint policy has paid out on a ‘first death’ basis, you might then consider taking out a single life insurance policy for the remainder of your years.

Although this is an option, it’s important to consider your age and health status, as this could mean paying higher premiums if you’re considerably older, or of ‘higher health risk’, since taking out your first policy.

Read: High risk life insurance

Advantages of taking out a joint life insurance policy

  • Cheaper premiums for joint cover: In most cases, opting for joint cover is cheaper than taking out two individual life insurance policies.
  • A pay-out is due irrespective of who dies first: A pay-out becomes payable after the death of the first policyholder, even if they are not the main breadwinner of the couple (‘first death’ policy). 
  • Available for unmarried couples:  Joint life insurance can also be taken out between business partners.

Disadvantages of joint life insurance

  • Splitting cover when a relationship ends: If a couple with a joint policy split up, the insurer cannot divide the cover. Similarly, if one partner decides they don’t want to pay their share of the premium, and the other policyholder is unwilling to cover both, the policy would cease.
  • One pay-out if both policyholders pass away at the same time: If both people die at the same time and have a joint policy, there will still be just the one final pay out.

 

Read: What’s the difference between single and joint life cover?

Joint life insurance and tax

Once a pay-out is due on a life insurance policy, there could be potential inheritance tax implications. One option to help sidestep a potentially large inheritance bill would be to set up your life insurance ‘in trust’.

A trust is a legal agreement which names the beneficiaries of your life insurance pay-out and isn’t included as part of your estate (which is subject to inheritance tax should you meet a certain taxable threshold). You can read more about life insurance and trusts with our dedicated guide.

Compare life insurance premiums

There’s a lot to think about when it comes to taking out a life insurance policy, but whatever you decide you should always compare premiums to make sure you get the best deal – and it couldn’t be easier with MoneySuperMarket’s free online comparison tool. 

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