If you and your partner are looking for life insurance, then you’re probably going to come to the question of whether you should purchase a dual or a joint policy. You might then come to the question, what’s the difference? Don’t worry, plenty of people get tripped up here. That’s why we put together this article to help you understand the differences and choose what’s right for you.
Dual Life Insurance
Dual Life Insurance insures both people on the policy separately. What this means is that the policy will pay out twice. Once upon the first death and again when the second policy holder dies.
This allows for a much greater level of protection for your loved ones. They will not be burdened with the expense of death after either passing. Extra cover does come with an extra cost though. Typically, the difference is not too significant, but it is there.
Joint Life Insurance
While Dual Cover continues after the first policy holder passes, joint cover ceases. As a result, it only pays out once. While this is beneficial for the surviving partner it does little to help their loved after the second policy holder passes.
If they wanted cover they would need to make another application for a single life policy. This application would likely result in higher premiums however, especially if the applicant is significantly older or has developed health problems since taking their joint policy.
The trade off for decreased cover is that your premiums will be cheaper. However, the savings that you are making on premiums are likely to be outdone by the additional cost of single cover life insurance if you decide to seek another policy when joint cover ceases.
So Which Should You Pick?
If you can afford the difference in premiums then we recommend going for Dual Cover nearly every time. If you are a couple with no other dependants then Joint cover may be sufficient but even so you may wish to choose dual cover to cover the cost of funeral expenses, or to establish a gift to an organisation you support.
How Are Dual Premiums Calculated?
For both Dual & Joint Cover premiums are calculated on the combined risk of each of the applicants. But both applicants are underwritten separately. So, if one of you is in bad health they will face an increase in premiums just as they would on a single policy. It won’t however affect the premium of the other applicant.
In essence the premiums of two policies are bundled together. Anything that would result in an increase on a single life policy will still apply.
What About Single Life Policies?
You can opt to get two Single Cover Policies. We don’t recommend it though. You will end up spending more money on premiums for little benefit. The only exception to this is if you are an unmarried couple.
If you are unmarried then it might make sense to take out “life of another policies”. You will pay higher premiums than a Joint or Dual policy, but there are tax benefits for doing so. An unmarried couple will end up needing to pay a 33% inheritance tax on the majority of the payout. However this tax does not apply to “life of another polices”.
Even in this specific instance Dual cover might be the better pick if you have a view to getting married.
Final Thoughts
Life insurance is different for everyone, but, the majority of the time we would recommend Dual Cover to a couple. The edge cases where another form of cover is the better option are usually only temporary circumstances, so with a long view Dual still comes out on top.
That being said, if you feel the savings in premium are more valuable to you, you will be paying less with Joint cover. The most important thing is that you know the options available to you to make a smart choice.
