Joint Life Insurance
What is joint life insurance?
Joint life insurance is a type of life insurance that insures two people, however, it only pays out once. In the event of one person’s death, the survivor will be paid a lump sum and the policy will come to an end. When the policy ends, the survivor no longer has life insurance for themselves.
This type of policy is most suited to married couples, long-term unmarried couples and even business partners. Typically, it’s cheaper than taking out two separate life insurance policies but it’s worth remembering that when one policyholder dies, the other is left uninsured. Also, joint life insurance policies can be difficult to administer in the event of separation or divorce.
How does joint life insurance work?
You and your partner will both be covered by the same policy and you can decide what pay-out you need to cover your financial commitments if one of you dies. You’ll make one monthly payment between the two of you and you can choose whether the payout stays the same no matter when you claim (level term life insurance) or if you want it to decrease over time as your debts reduce (decreasing term life insurance).
Joint life insurance policies only pay out once but when they do depends on the type of policy you have:
- ‘First death’ policy – the insurance provider pays out after the first person dies. There will be no further payments when the second person dies so the survivor will no longer have life insurance.
- ‘Second death’ policy – a payout is made only after both policyholders have passed away.
What are the pros and cons of joint life insurance?
Pros
- It’s typically cheaper than taking out two individual life insurance policies
- It’s available to any couple, whether that’s a married couple or business partners
- It pays out regardless of which partner dies first
Cons
- If both policyholders die at the same time, there will still only be one payout
- If the relationship ends, the policy can’t be split so it will have to be cancelled
- If one of the policyholders has poor health, your monthly payments might be higher
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