Q: When is it appropriate to recommend a single or a joint life plan for couples looking for protection cover?
A: When advising couples about their protection needs recommending a joint life policy to cover a mortgage might seem like the best option. But in terms of value for money and the cover it provides taking out two single life policies will give clients more flexibility in the long term.
The benefits of two separate life policies mean that each policy can be tailored to the individual. They can have different terms to run and be individually changed or altered depending on circumstances. Should one of the couple die or suffer a critical illness, and claims on their plan, the other plan will still be in place, providing uninterrupted cover. This set up would also ease any problems should the couple split up at a later date.
Taking out a joint life plan means that any changes to the cover or term would affect the couple jointly. A number of protection contracts have separation options for joint plans which can be used in the event the couple go their separate ways.
Other product features include reinstatement or replacement options which give some flexibility when providing protection cover after a claim.
Single life cover may be more expensive but the difference in price is minimal. For a male and female both aged 32 looking for £200,000 worth of life or critical illness cover for mortgage protection, a joint life plan would cost £92 whereas two single life plans providing double cover would be £104*. So for £12 more, a couple could ultimately end up with a double payout as claims from both of the lives assured will be covered, rather than just the first.
Another benefit of two separate life policies is that each person can put their plan in trust for the other. If the relationship breaks down before death, the plan owner can nominate other people to receive the payment. This can also be a useful way of mitigating inheritance tax and speed up the payment process, as the insurance company can pay the trustees without having to wait for probate.
When it comes to value for money and flexibility the separate single policy approach wins hands down. While joint life cover will be cheaper than taking out two single life plans, for the benefit of continued protection and peace of mind, it really is worth addressing individual needs.
* Quotes based on clients aged 33 next birthday and non-smokers. Plan term is 23 years. Definition of disability is ‘own occupation’. Guaranteed rates. Scottish Provident July 2013.
