If you’re looking for life insurance for both yourself and a partner or spouse, then you may well be shopping around for the cheapest joint life policy. At first glance that makes perfect sense as a joint life policy is likely to be cheaper than two single life policies (up to 30% cheaper in some cases). On further inspection however, it may not prove to be the best option.
Here is why we always recommend you weigh up the pros and cons of both:
A case study
Mr and Mrs Smith are both 41 years old and have a three year old son. They both work, and want to leave a lump sum of £500,000 should one of them die. They decide to take cover to the age of 65 years old, which is their planned retirement date.
If they buy two separate single life policies, the total premium they would pay works out at £86 a month. If they opt for a joint policy, their total premium is £78 a month, only £8 a month cheaper.
If they both die
If Mr and Mrs Smith decide to take a joint life policy, and both of them die in an accident, their son would receive a lump sum of £500,000. But if they had taken out two single life policies, their son would receive two pay-outs totalling £1,000,000. (To achieve £1,000,000 of cover on a joint life policy would cost them £145 a month.)
If one of them dies
If Mr and Mrs Smith buy a joint life policy and one of them dies, the policy pays out and then terminates. Which means the person who is left behind has to buy a new policy, and that is likely to cost them more (assuming they are a few years older by then). For example, say Mr Smith dies in 10 years’ time, Mrs Smith would need to take out a new policy. At today’s rates, she would have to pay £81 per month as a 51-year-old, nearly double the amount it costs her for one single life policy today.
If they divorce
If Mr and Mrs Smith take out a joint life policy and then decide to go their separate ways, they will probably have to cancel it and start again with two single life policies. As illustrated in the example above, depending on how old they are when they divorce, they can end up paying a lot more than if they had taken two single life policies in the first place.
Michael Ward, Managing Director of PayingTooMuch.com said “We always recommend that you look beyond the headline rate when you’re buying insurance. While it’s tempting to go for the cheapest option, by thinking ahead, you can actually end up saving money in the long run, and also get a lot more ‘bang for your buck’ in terms of cover.”
Source: The figures used in this article are real-life quotes sourced on payingtoomuch.com.