Many people assume life insurance is only required for the breadwinner of the house, however that just isn’t the case anymore. There are plenty of couples who share an income, which means they could be at financial risk should the other pass away.
The good news is that life insurance can be bought between couples – such as joint life insurance. This is one of the main options couples are faced with when searching for cover.
We’ll discuss more about which option is best for you, as well as why you should consider buying life insurance, in this article.
Why do couples need life insurance?
Life insurance is there to protect your family financially if something were to happen to you. If you’re married and both partners work, then you may not want to rely on one partner being able to provide for your family.
If you have children, it’s important that their future is taken care of too. You don’t want them to struggle financially after you’ve passed away.
You also need to think about what would happen to your loved ones if you died. Would they be able to afford to pay off any debts or mortgages? Could they cope without your income?
This is where life insurance comes into play. It allows your beneficiaries to receive a lump sum amount of money, which will help them out in these situations.
Which type of life insurance should I buy?
Looking to buy life insurance, but aren’t sure which policy to buy? Here’s an overview of the main choices for cover…
Joint life insurance
Joint life insurance is a type of life insurance that covers both partners in a relationship. You apply for a policy together, which leaves the surviving partner with a cash lump sum
This differs from single life insurance, where each individual applies separately and gets separate payments.
There are two types of joint life cover
- First death – which pays out after the first death in the couple. Once this occurs, the surviving member will need to buy further cover if required.
- Second death – which pays out after both you and your partner have died. The money can then be used to help your children, and is often seen as the most suitable option for couples.
One of the main benefits of joint life insurance is that it provides protection for both parties. This means that if one person dies, the surviving spouse will still get paid. Another benefit is that it can be cheaper to buy than taking out separate policies.
Term life insurance
The most common form of life cover is term life insurance, it protects the policyholder for a set period of time.
The policy term is agreed upon with your insurer when you take out the policy. Term life policies only pay out if the policyholder dies during the policy term, otherwise the policy expires.
Upon your death, a cash lump sum is paid out to your loved ones. They can use this money to cover various finances, such as living costs, funeral expenses, and mortgage repayments.
There are three levels of cover for term life insurance:
- Level – Both the value of the payout and monthly premium remains fixed throughout the policy.
- Increasing – The value of the policy increases over time to protect it from inflation. Your premiums can also rise as a result.
- Decreasing – Used to cover a mortgage. The value of the policy decreases as you make repayments over time.
Whole life insurance
Whole life policies are a great option for people looking for long-term protection against financial loss. They provide coverage for the rest of your lifetime. Your premiums remain fixed regardless of what you reach and any health problems you might develop in the future.
Once you die, the policy pays out a cash lump sum, payable to your loved ones. As cover is permanent, a payout is guaranteed – so long as you keep paying your monthly premiums.
One downside is that this type of cover is often the most expensive, however you are protected for years to come.
How much cover should I buy?
Life insurance is a crucial component of most people’s finances. However, it can be difficult to know exactly how much coverage you require, especially when you are married.
Here are a few things to consider when deciding how much cover you need:
- How much do you and your spouse earn?
- How much money do you spend each month on average?
- Do you have children? If so, you will likely require more coverage
- Do you have any financial obligations, such as a mortgage?
In most cases, the amount of cover required depends on your circumstances, such as if you have dependents, and how long you want to plan ahead.
In addition, there are some circumstances where it makes sense to take out a policy that provides more cover than your combined salaries, such as if you have young children and plan to start a family soon.
What happens to my joint life insurance policy if I get divorced?
If you have a joint life policy and separate from your spouse, you will usually have the option to cancel the policy.
If you decide to go ahead with cancelling the policy, there will be no refund and no payout. Instead, if you want coverage to continue, you’ll have to take out a new single life insurance policy or transfer the policy either to you or your spouse.
However, if this occurs years after taking out the policy, there are a few conditions that could be affected if taking out a new policy.
Because you are older, the cost of the new policy is likely to increase, since age is one factor influencing the size of premiums. In addition, if your health has deteriorated while you had the joint policy, this could also push up your costs further.
If you think you need life insurance, head online to apply for a policy from one of the many providers out there. However, make sure you shop around to get the best deals.
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