Regardless of how savvy a couple is, an unexpected turn of events resulting in you or your partner passing away or being diagnosed with a terminal illness is likely to be devastating, emotionally and perhaps financially too. This is where life insurance could come in and help you cover the expenses that you would normally deal with together. For example, the cost of repaying any personal loans or a mortgage, covering bills and expenses and providing for any kids may be covered (or partly covered) by a life insurance policy.
Couples who want to take out life insurance generally have two options: a joint policy or a single policy. Let’s take a look at how a joint life insurance policy could work and how it compares to a single life insurance policy.
What life insurance options do couples have?
When choosing life insurance, you generally have the choice of applying for a single policy (on your own life) or a joint policy (to include another person).
Joint life insurance, sometimes referred to as ‘multi-life’ insurance, is where two people are insured under one policy. It is usually taken out by two people with shared financial interests, such as spouses, partners or de facto partners. Under a joint policy, the sum insured amount for each partner can be different.
If one partner dies, the benefit amount will be paid to the surviving insured person. However, some insurers may require you to nominate your partner as beneficiary for this to occur. The ownership of the policy will then typically go to the surviving partner and the policy will continue to operate as a single life insurance policy. In the event that one partner is diagnosed with a terminal illness, the benefit amount would be paid to both owners of the policy.
In comparison, single life insurance only covers one person who is the sole owner of the policy. Couples taking out single life insurance can name each other as beneficiaries on their own respective policies, meaning your partner can receive the benefit should you die. Any terminal illness benefit would be paid out to you as the policy holder.
Pros and cons of joint life insurance
One of the potential benefits of having joint life insurance is that it may be cheaper than taking out two single policies. This is because some insurers offer joint policy discounts (often about 5%). Another benefit is that it may be more convenient as you would deal with one insurer and one policy.
In terms of disadvantages, joint life insurance can get complicated if your relationship breaks down. While you can decide to keep the policy in place, cancel it or transfer it to one person, you will only be able to split the policy if both parties agree to do so. If one partner refuses to split the policy, it will remain in place as long as premiums continue to be paid. This means that if one of the insured individuals dies, the benefit will still be paid to the surviving insured former partner. Additionally, if both partners agree to split the policy, any joint policy discounts are likely to no longer apply.
Pros and cons of single life insurance
With single life insurance, the policy belongs solely to you and is not dependent on any relationship. This means that if your relationship does break down, it may be more straightforward to change your policy and remove your former partner as a beneficiary than it would be to deal with a joint policy.
In terms of price, two single life insurance policies may potentially be more expensive than a joint policy but this will depend on the insurer and your circumstances. Some insurers may offer discounts if you and your partner both buy life insurance policies at the same time. But, if you were to buy a policy today and your partner bought a policy at a later date, you usually would not receive a discount.
Should I get single or joint life insurance?
Joint life insurance won’t be appropriate for all couples. Whether you should take out single or joint life insurance will depend on your individual circumstances and needs.
However, there are some instances were single life insurance may be more appropriate. For example:
- If there is a significant age gap between you and your partner. As premiums are generally based on the older person, so this could mean higher costs for the both of you.
- If one partner does not qualify for life insurance.
If only one partner has an income, this doesn’t necessarily mean you should only purchase one single policy. It’s worth keeping in mind the household contributions each partner makes and how much it would cost to pay for things like childcare if the partner responsible for this were to pass away.
If you’re weighing up single and joint life insurance, it’s a good idea to seek further advice to confirm that the policy meets your individual needs and circumstances.
Additionally, keep in mind that many super funds offer life insurance for their members. So, it might be a good idea to check what cover is available through your super fund (or what cover you may already have in place by default) so you can factor in all your options.
If you’re comparing life insurance policies, the comparison table below displays some of the policies currently available on Canstar’s database for a 30-39 year old non-smoking male working in a professional occupation. Please note the table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical) and features links direct to the provider’s website. Use Canstar’s life insurance comparison selector to view a wider range of policies.
Image Source: Travel Man (Shutterstock)
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