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Decide whether joint life insurance or single life insurance is best for you.
The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please make sure you speak to a financial adviser. Any references to tax fee or tax treatment are based on our understanding of current legislation and tax treatment at the time of writing, which may of course change in the future.
Joint life insurance policies are generally cheaper than taking out two separate policies with the same level of cover.
However, if you’re in a relationship, especially if you have children, you may find that a combination of both single and joint policies gives you more flexibility.
This guide examines the pros and cons of joint life insurance vs single life insurance to help you decide on the cover you feel you need.
If you’re unsure which option is best for you, speak to a life insurance adviser.
Joint life insurance vs single: What is the difference?
Life insurance helps to ensure that your loved ones are financially supported if you were to pass away. Choosing life insurance for families provides a lump sum payout that acts as a vital safety net, offering protection and reassuring peace of mind for those with dependants.
There are many different types of life insurance, including joint life insurance and single life insurance. You can choose between separate policies for you and your partner, or a joint policy that covers you both.
When it comes to joint life insurance vs single life insurance, which option is best for you?
1. Single life insurance
Single life insurance covers one person. This makes it possible for couples to each take out a separate policy, providing two potential payouts if each person insured dies.
The policyholder decides the amount of cover they need and the length of the policy they think they’ll need. A single life insurance policy will then pay out a tax-free lump sum upon the person insured’s death, provided it falls within the policy term and that all premiums have been paid.
There is usually no cash-in value with a life insurance policy.
2. Joint life insurance
Joint life insurance policies cover two people under one policy, with one premium. While typically taken out by couples, you do not have to be married or in a civil partnership to share a joint life insurance policy. However, you should have what is known as an insurable interest, meaning that each person would suffer some form of financial loss or hardship if the other person dies.
This type of policy pays out a lump sum when one of the insured people passes away. A policy is based on the age, health, employment and lifestyle of both individuals. The policy term and amount of premiums are agreed between both applicants and the insurance provider.
Like single life insurance, joint life policies only pay out once, but unlike a joint policy, the cover ends when the first person insured dies, which then leaves the other person with no further insurance cover. If this happens, you may want to start a new single life insurance policy to ensure you and your dependents are still financially protected. However, as you’re older than when you took out the joint policy, you’re likely to pay more for your cover, and if your health has changed, you may find the insurance provider is no longer prepared to offer you a policy.
Joint life insurance is often more cost-effective than taking out two individual single policies, making it a popular choice for married couples, those in civil partnerships or relationships, business partners and anyone who shares joint responsibility for a mortgage.
Joint life insurance vs single life insurance: A comparison
Both joint and single life insurance provide financial protection for others when you’re no longer around. However, if you have people who depend on you financially, there are some key differences between the two options that you should understand:
| Feature | Joint life insurance | Single life insurance |
|---|---|---|
| Type of cover | Both people under one policy | One person only |
| Cost | Often cheaper than two individual policies | Two single policies can often be more expensive than a joint policy |
| Type of payout | One payout either on first or second death | Two separate payouts, one for each policy |
| Tax-free lump sum | Yes | Yes |
| Flexibility | Only one amount of cover for both people | Each person can have a different amount of cover for their own policy |
| Suitable for | Couples needing a shared, cheaper policy who have the same coverage level requirements | Those needing individual protection with different coverage levels |
| Divorce or separation | Options to cancel, divide or adapt the policy to cover specific debt/costs | No change – each individual retains their own policy |
| Policy options | Level term, decreasing term, whole-of-life, critical illness cover | Level term, decreasing term, whole-of-life, critical illness cover |
| Payout process | First death payout goes to the surviving policyholder (unless it’s placed in trust, or assigned to someone else – for example your mortgage provider) | Each individual receives a payout for their chosen beneficiaries (unless it’s placed in trust, or assigned to someone else – for example your mortgage provider) |
What are the pros and cons of single and joint life insurance?
People often take out life insurance when they reach a major milestone, such as starting a family or buying a home.
Couples should carefully assess the advantages and drawbacks when choosing between single and joint life policies. Each option has unique features that can impact the financial security of the surviving partner or dependents.
Here are some of the pros and cons:
Benefits of a joint life insurance policy
- When the first person dies, the payout usually goes directly to the surviving policyholder.
- Shared cover is usually cheaper than two individual policies with only one premium payment.
- Only requires one application for the policy.
- Policies can be written in trust to help reduce the impact of inheritance tax.
Important considerations of joint life insurance
- The policy ends after the first death, leaving the surviving policyholder without any cover.
- Both partners must jointly agree on the level of cover, because there is only one cover amount.
- Dividing or changing the policy can be complicated after divorce or separation.
Benefits of a single life insurance policy
- Each policyholder can set different coverage amounts based on their individual requirements and needs.
- Flexibility for each person to change, increase, or cancel their policy without affecting the other.
- If both claims are valid, each policy pays out separately, resulting in two payouts in total.
- If couples separate, each person keeps their own policy with no need for adjustments.
- Policies can be placed in trust to help reduce inheritance tax and ensure the payout goes directly to beneficiaries.
Important considerations of single life insurance
- Two individual policies are usually more expensive than a joint policy.
- Both partners will need to separately apply and pay for their own individual policy.
- May not be suitable for all budgets where affordability is a concern.
What happens to life insurance after divorce or separation?
Whether you have joint life insurance or single cover, your policy won’t automatically change if you divorce or separate from your partner.
However, your decision may have financial implications that may require you to revisit and adjust your options based on your circumstances:
- Joint life insurance: When you separate from your partner, some life insurance providers allow you to split a joint policy into two single ones. However, this isn’t always possible, so always check the terms of your cover.
- Single life insurance: If you already have an individual policy, you can keep your cover without additional complications.
- Asset ownership changes: Divorce settlements may affect ownership of marital assets, such as the family home. Therefore, you may need to adjust your policy accordingly.
- Mortgage reviews: If you have mortgage life insurance, separation can be a good time to review your cover to ensure it still meets your needs.
Why should I consider joint life insurance?
If your major financial commitments, such as a mortgage, are shared with your partner, a joint life insurance policy could be a practical option.
Joint life insurance can ensure the mortgage is paid off if one of you dies, easing the financial burden on the surviving partner and other dependents.
Also, joint life coverage tends to be cheaper than two individual policies, which can be useful if one partner is more costly to insure than the other.
Joint life insurance vs single life insurance: Which is right for you?
This all depends on your circumstances and your reasons for getting life insurance.
Joint policies can be simpler to claim on, as the payout usually goes straight to the surviving policyholder. Whilst they are often cheaper than who single policies, there can be complications should you divorce or separate in the future.
With single policies, unless they have been placed in a life insurance trust, the payout usually goes to the deceased’s estate, which may incur inheritance tax and take longer to reach beneficiaries. However, single policies also ensure that both partners are covered independently, even when one of you dies or the relationship ends.
By considering your coverage needs, relationship status, policy costs and other important factors, you can make an informed choice about which option works best for your situation.
Can’t decide between joint or single life insurance? Speak to an expert today
Our life insurance experts will discuss your circumstances and financial needs to help you make the right choice between joint life insurance or single policies. Speak to a life insurance adviser or contact us today.
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