Single or joint life insurance policies

By: Vera Nagtegaal, Executive Head of Hippo.co.za

Which should couples choose?

Life insurance is always a top priority for adults, especially as people move in together, get married and families expand. Each family dynamic is unique, which requires the right insurance policy to ensure that everyone is covered in the event of the death of a family member.

This is according to Vera Nagtegaal, Executive Head of Hippo.co.za, who explains that, aside from the different options in life insurance policies such as whole life or term life cover, two other types of life cover that families can consider are single or joint life policies.

Nagtegaal explains that Joint Life Insurance allows you and your partner to be covered by a single policy, with the same terms and conditions.

“It will be paid out when one partner passes away. The surviving partner will then, however, not be insured. This option is cheaper than most, due to its one pay-out.”

Conversely, a single life insurance policy covers one person only. It pays out a lump sum if that person dies during the period set out in the policy. Both partners can have their own single life insurance policy. Since each is separate, it amounts to individual pay-outs when each policyholder passes.

Nagtegaal says that the best way to decide if a joint cover policy is right for you is to look at whether it would meet your requirements.

“It is most suited to nuclear families, where both partners contribute an income to the household. If a partner passes away, their spouse and children will then be financially secured, even though an income will be lost. As the policy is usually cheaper than two separate policies, couples who are struggling financially may also find a Joint Life Insurance policy more viable.”

Having joint cover has several benefits. It is paid out irrespective of which spouse or partner dies. It is usually cheaper than having to pay for two individual life insurance policies, which allows younger couples to save. Joint cover leaves the family more secure compared to if just one spouse was covered, and stay-at-home moms and dads can be covered too, which means that extra burdens like childcare costs are covered should they pass away.

Nagtegaal points out that a joint policy would result in one payment, and when this is paid would depend on the pay-out policy chosen.

“A First Death policy would need to be paid once either of the policy holders pass on. This would mean that the remaining partner would not be covered by the policy any longer. One major implication of this would be that the living partner may have difficulty taking out a new life insurance policy, as they would probably be older. A Second Death policy pays out when both policyholders have passed away. This type of policy is often more expensive.”

If both spouses die at the same time, the pay-out becomes part of the estate. Policyholders have the option to have their policy being written ‘in trust’, which ensures that money is put into a trust fund which is tax-free.

Nagtegaal says that the policy cannot be divided up, in the case of divorce or separation.

“If one partner decides to not pay their half, the policy will cease to exist unless the other partner decides to take it over and requests a change in beneficiary and updates the terms of their will. This decision can be made based on the primary caregiver or financial provider of shared minor children.”

“Everybody’s situation is different, which is why it’s always best to compare life insurance quotes from a range of providers before you make your final decision. Costs and benefits can vary greatly so it is important to do enough research before you choose a policy for you and your partner,” says Nagtegaal.