Joint Life Cover

What’s in a Joint Life Cover?

Currently, a joint life cover is becoming nearly as popular as term life assurance in the UK. Many people, mostly husbands and wives, and business partners are taking out this double life assurance with a single policy.

You may be wondering what a joint life cover is. It’s essentially a type of life assurance where two or more persons’ lives are simultaneously covered, with the death benefit upon death of only one of the parties insured. Because the probability of paying for the death benefit is higher than it is in a single life assurance policy, the premiums are normally high. It’s important to note, however, that the premium of a joint life cover is significantly cheaper than that of combined separate life covers with the same amount of cover. This is probably why a joint cover is so popular.

Types of a joint life cover

There are only two types of this cover; one that pays the death benefit at the first death, and one that pays at the last death. Married couples usually take the first-death joint life cover because death of one of the parents can cause terrible financial problems, thus an immediate payout is more desirable. However there are circumstances where a last-death joint life is more suitable. For instance, in trusts written in the names of a married couple’s children, the children would receive the payout without having to go through surrogate court proceedings if the last parent dies. Interestingly, a last death joint life cover is also less expensive than a first death cover.

Advantages over two separate life cover

If not married couples, business partners usually take out a joint life cover because it fundamentally serves its purpose of saving money. Because businesses must do everything it can to minimize their expenses, instead of taking out two separate life assurance deals, two or more business partners may execute just one policy covering all of them concurrently. Apart from being economical, a further advantage of a joint life assurance is its simplicity. Just pay one premium for one policy and that’s all there is to it. Juggling two life assurance policies and worrying about paying separate ones are no longer necessary.

One major drawback

Unfortunately, there is one flaw in this type of life cover; there is no guaranteed sustainability. This is largely due to the fact that marriage and businesses are not sustainable. Just as husbands and wives go their separate ways when a divorce takes place, business partnerships end when the company shuts down. Since premium payments are usually done collectively, concerned parties may not want to pay the premiums anymore, resulting in a lapse in the joint life cover policy. GP