Choosing the right life insurance policy is not an easy task. It takes more than just a signature and a few minutes with your broker to make the right selection as there are many factors to consider. Most people, who have heard of a joint policy, seemingly know about its benefits but do they understand the cons? A joint life insurance policy is normally recommended for couples who have children or plan to have children.
Taking a joint life policy means you are covering two or more lives under the same policy. There are two different kinds of policies under this section of insurance. The first one offers the surviving party a lump sum payment and the second pays only when both parties dies.
In simple terms, the pros to this policy will be the costing, the factors around the pricing of this brings your premiums down as two lives contributing to the risk pool are better than one. For the financially unstable couple or newlyweds, this is the correct way to count your pennies. This policy offers one admin fee instead of two and in the event of one party being unhealthy, the risk rating will be lower due to the joint rating.
As with anything there are ups and downs. The down side to a joint policy is that in the event of both parties dying, there will only be a single pay out as opposed to two pay outs to their beneficiaries (had they purchased individual policies). Another thing to consider is that in the unfortunate event of the couple divorcing, they would have to re-apply and would be subjected to new underwriting which may be to their disadvantage given their age at the time of divorce.
So in conclusion it’s important to take careful consideration when deciding on which option to take. In the end the main factor will come down to affordability versus flexibility.
By: Amanda Steyn (financial advisor)
