What is the meaning of joint life insurance?
Joint life insurance policies are designed to cover spouses or partnerships in the event of the death of either partner. But why might this be better than a standard policy that only covers one party?
Life insurance is designed to ensure that your dependents do not suffer financially in the event of your death, and many traditional policies have been put in place to cover the primary breadwinner.
Since this person makes the most financial contribution to running a household, this approach might make sense.
But the consequences of the other partner's death - even if they don't earn as much, or have no income because they are taking care of the children full time - can also be dangerous financially.
This is why it is worth considering having life insurance that covers the potential death of either partner
Equal contributions
Many families today have two breadwinners. Often losing any of the income leads to huge financial problems.
In such cases, it is easy to take out the life insurance case for both partners. But this does not mean that the father or mother should not be insured in the home the same way.
After all, their work - raising children and taking care of the home, for example - is of great value, even if they don't get direct pay for it.
If the stay-at-home parent passes away, his partner faces an additional significant financial burden.
Either they will have to work less to devote more time to their family, or they will have to pay for extra help such as nursery care or home help.
Obviously, in such circumstances, both partners need to have life insurance.
Your cover options
When it comes to securing two people, there are two options. Everyone can get their life insurance policy, or they can get a co-life insurance policy.
Let's take a look at the differences
The extent of Coverage: Through two separate policies, the insurance will be paid upon the death of any of the policyholders during the policy period.
With the joint-life policy, payment is only upon the first death. After that, the other policyholder will not be covered.
This could lead to more problems in the future: if a surviving partner needs to find new life insurance later in life, it will likely be more expensive because they are older.
And if they have suffered from any health or medical issues since the original cover was created, this will increase the premiums even further.
Price: Since two separate policies provide more coverage, it is usually more expensive than a joint life policy. But the difference may be very small, and it is worthwhile to compare prices for both options.
If there isn't much, you may feel happier with the additional protection separate policies can provide.
If you are buying term insurance, which only lasts for a fixed number of years, the spread is likely to be smaller.
Flexibility: Adopting two separate policies allows you to ensure each life in different amounts, if appropriate.
For example, the main breadwinner in your family may be insured for an amount greater than the amount paid by the homestay parent.
Problems may arise if a married couple who has a co-life insurance policy decides to separate: the insurance company is unlikely to split the insurance cover or not.
In this case, either party will be left to need to arrange to secure it again from the start.
This can be costly, as explained above, if a lot of time has passed (life insurance premiums are higher as you get older) or if you have suffered from any health issues since the original coverage was arranged.
Reducing the tax bill for your family
When setting up a life insurance policy, it is also helpful to think about how to ensure that your dependents can receive any compensation at the lowest possible tax cost.
Writing your life insurance policy in a trust form means that the cover is fenced off the rest of your assets, such as savings, investments, and properties.
This means that payments from the policy are not included in your possession for inheritance tax purposes.
A shared life policy can be written in an Amanah so that the amount goes to the surviving spouse or any child if both parents die.
Trust is usually simple and cheap (or even free): Talk to your insurance company when you take out your policy, but keep in mind that trust is not appropriate in all circumstances.
The main points you need to be aware of in shared life insurance policies
- The benefits of co-life insurance are that it pays regardless of which partner dies, and it is cheaper than having two individual life insurance policies.
It may be beneficial for young couples trying to save money on insurance premiums, or for business partners.
- Hinge Cover provides extra protection when you only have one single policy for the main breadwinner.
Even if someone stays at home to care for their children, it is usually worth providing some coverage for them as if they were going to die, the childcare costs can be a burden.
- When each home partner's salaries vary greatly, it can be helpful to take two individual policies - one for each. Can be designed to provide a suitable cover for everyone.
- Two individual documents for the same amount will cost more than the equivalent joint policy but provides twice the cover.
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