Importance of Joint Life Insurance with Spouse
13th Sep, 2013
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Life is full of surprises and unfortunate events can strike unexpectedly. Without a form of risk prevention in place, a loss of the main income earner or homemaker due to a disability or death can affect many families financially and emotionally. Therefore, it is essential to consider how having a life insurance policy in place does not only benefit you and your partner in the short-term, but also for the long-term.
If you are the primary income earner in the family, getting yourself covered is important. Studies have shown that at least one in five families will be affected by the death of a parent, by a serious illness or injury, in which the parent is unable to work. Being uninsured or underinsured puts your family at risk of facing severe financial hardship with no form of protection in place, leaving them to rely on personal savings and government welfare that are not sufficient in the long run.
Many of you may not see the necessity in having a life insurance cover in place if you are a housewife or househusband, especially if you contribute little to no income to the household. However, to a family unit, a homemaker is deemed as important as the breadwinner, and losing them can be detrimental emotionally and financially. Homemakers have significant contributions to the household, even if they are not in a monetary form, from maintaining the family home, taking care of the children, and performing common household duties. Therefore, it is also important to consider life insurance to safeguard the value of a homemaker in taking care of the family unit.
A joint policy is, as the name states, a life insurance contract that is owned by two people, usually by married or de-facto couples. Now that you have made the decision to cover both you and your partner/spouse, you may be wondering – should I opt for one joint life insurance or two life insurance policies?
There is no straightforward answer to this question, as it all depends on both your needs and personal circumstances. It is essential that the both of you discuss this matter thoroughly upon making a decision, as the outcome will affect both parties equally.
There are number of differences between individually-owned life insurance and joint policies, such as:
|Feature||Joint Life Insurance Policy||Single Life Insurance Policies|
|Ownership||Owned by two individuals, who may require a jointly-owned cover as both parties have a recognized financial interest in each other, such as married couples, de-facto relationships, and business partners.||Both parties may have a financial interest in each other, however, they have two separate individual policies.|
|Price||Joint policies are generally eligible for a discount in premiums of between 5-10%.||Two separate policies mean two lots of premium payments, which can potentially be more expensive in the long run.|
|Insurance needs||Suitable for couple or business partners with interdependent relationships, who have similar life insurance needs.||Suitable for individuals with insurance interest in each other with different needs, for example, if is a wide age gap between you and your partner/spouse, or one of you does not qualify for cover.|
|Benefit payment||As there is only one policy on two people, the nominated beneficiaries will receive one benefit. The sum-insured will be paid on a ‘first death’ basis, on whoever dies first and the contract will then end.If it happens that both policyholders pass away at the same time, only one payout will also be released.||Individually-owned policies will pay out twice and you can opt for different cover amounts.|
|Future events||If your relationship breaks down, splitting a joint life insurance policy can be difficult. The policy may lapse if one of the policyholders no longer wants to meet the premium payments. Nominating beneficiaries for the benefit payment may also be problematic if both parties have competing interests.||With separate life insurance plans in place, both parties will still be covered even if they have split and gone separate ways. Single policies will also allow them to choose their own beneficiaries.|
Deciding between having a joint or separate single life insurance plans is not the only factor to consider by you and your spouse/partner. There are other elements to determine when choosing the right life insurance plan for you:
As previously mentioned, the decision to choose either single life insurance or joint to cover both you and your partner is entirely your own. It is important to assess both your needs and circumstances to gain a better understanding on why you require life insurance in the first place. If you require further assistance, speak to an insurance consultant who can provide tailored advice to your situation and recommend the right policy to your needs
To learn more about our life insurance product that offers joint cover, click here.
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