Twin Room, Not Double

Two separate life policies are often better value for couples than a joint policy - it just makes sense.

Decisions about value for money are a daily reality in all our lives. Whether it is a new car, a computer or even a box of chocolates, most people will take the time to compare prices and choose the item that gives them the best value for their hard-earned cash.

When it comes to taking out life or critical illness cover, price has always been an issue. For many people protection is seen as a luxury product rather than a necessity. But with the UK population worringly underinsured, providers need to be offering a product that not only meets the customer's needs but is also seen to be offering good value for money.

Take joint life plans. When a couple needs protection, it is natural for an adviser to quote for a joint life policy. But is this best for the customer from the point of view of price and the protection is provides? Joint life policies seem perfectly logical for covering mortgages because a loan only has to be paid off once. But these days in order to provide the family complete protection a joint life policy might not be enough. The death or critical illness of either partner can have devastating effects on the family finances. Effects the family may feel unable to cope with at a time of emotional stress.

Certainly, a joint life policy will be cheaper than taking out two single life plans. But for the benefit of continued protection and peace of mind, it really is worth talking to clients about the option of taking out two single life policies.

For example, consider Jackie and James, both non-smokers aged 35. They have two children and both have full-time jobs. They recognise the need for life insurance and are advised to take out a joint life term assurance over 20 years for £100,000. Their premiums have been quoted at around £9 a month. This policy will pay out once if either of them dies within the term.

Had Jackie and James been advised to take out two single life policies, their monthly premiums would be about £15. However, they could ultimately end up with a double payout of £200,000, as both deaths will be covered, rather than just the first.

Single life policies may be more expensive, but the advantages mean they are much better value for money. With joint life first death, if one person dies, the second person is left with no life cover. If the first death happens some time after the policy has been taken out, the survivor is likely to be older and therefore more expensive to insure.

Single Life

Choosing the single life policies approach also provides a couple with more flexibility. If they should unfortunately split up, they would each have their own cover. Joint life first death policies cannot be separated which would mean cancelling the joint policy and taking out two single life plans.

Another benefit of two separate life policies is that each person can put their plan in trust for the other. And if the other is not around or the relationship breaks down before death, the plan owner can nominate other people to receive the payment. This can also be a useful way of mitigating inheritance tax and speed up the payment process, as the insurance company can pay to trustees straight away, rather than having to wait for probate.

So when it comes to value for money and flexibility the separate single policy approach wins hands down. It might involve a little extra paper work, and a few more pounds a month but the extra protection it provides more than compensates.