Having made the decision that you have a requirement for life insurance, you would be forgiven for thinking that to just arrange one plan to cover the both of you will do the job and you can move onto the next financial thing you need to do. This is not necessarily the end of it and furthermore may not be the best thing for you.
To get to grips with why one solution is better than the other you first have to understand what these solutions are and what they actually mean to you in your financial situation. It has to be said that when a lot of couples are faced with the need for life insurance the instinct is do arrange the cover on a joint life first death basis. This type of plan is simple it insures you for the sum assured and when the first of you dies it will pay out and then cease to exist.
The alternative is to arrange life cover on the basis of two single life plans one plan for each person. The result of this is, if one person dies the plan which they own will pay out. The important thing here is the surviving person still has their own life insurance in tact. This is because their plan was not affected by their partner dying.
It is quite common that when couples take out plans to insure themselves that should one of them die the other is in a position of having no life cover at all. This commonly leaves them needing to arrange life insurance as they may still have a need to insure their lives for one reason or another. If this event is sometime after taking out the original plan they will probably find that the cost of cover is considerably higher at this point due to many reason not least the fact that the life assured is that much older and more expensive to insure.
One other reason why two single life plans can be far more beneficial to the one joint life first death plan is down to how relationships and marriages work, or not, as the case may be. It is said that 40% of marriages will end in divorce and a significantly higher percentage of relationships will end in separation. In these situations assets have to be split in order to pass equal benefit to each partner. Life insurance plans are in most cases, if not all, impossible to separate. So if you have to single life plans this problem does not present itself as each life assured walks away with their own plan in tact.
You might be forgiven for thinking that arranging two plans in favour of one joint life insurance plan would be considerably more expensive and therefore make it financially prohibitive. This is not the case, in most cases arranging two life insurances plans for a couple need only cost approximately 10% more on the premium. Once this is taken into account paying an extra 10% more in premium is significantly worthwhile when assessing the overall benefits that you get from having the two plans over the one.
An additional benefit that is important to remember with two single life plans is that in the event of the first person dying the surviving plan holder as they still have their plan in tact they essentially experience the benefit of double the cover as their plan will pay out the sum assured again if they die.
So in summary having two plans over one means you do not have to reapply for life cover if one of the lives assured dies, you have a far more flexible arrangement should you separate and finally from a cost point of view, being on average only 10% more monthly but with twice the amount of life cover this type of arrangement is far more financially beneficial.
Many people aren't aware that it they can benefit more from having their own life insurance policy. Thought they know they need insurance, they haven't explored all their options. If you're thinking about getting life insurance for yourself and your partner, here's some information that might help.
It's important, whenever you buy life insurance, to understand the choices available. If you're a couple looking for life insurance, there are some downsides to the traditional joint life first death plan. The way benefits are paid is usually simple - they're paid out on the person who dies first. However, after this happens, insurance coverage disappears. That means that the survivor doesn't have any protection for themselves.
Alternatively, it's possible to arrange insurance coverage as a pair of single life insurance plans. This provides benefits for both partners, regardless of when death occurs. That means that children and other dependents can expect to receive benefits if the people covered by the plans die. Individual plans aren't affected by the death of the other partner, even if the couple is legally married.
Unfortunately, most couples who take out insurance plans don't think about the possibilities of traditional plans. This leaves one of them without cover, and may force them to arrange alternative life insurance in a hurry if insurance is required. Since taking out a plan when you're older is a lot more expensive, a joint plan can cost you more in the long run than two individual plans.
One other reason why two single life plans can be far more beneficial to the one joint life first death plan is down to how relationships and marriages work, or not, as the case may be. It is said that 40% of marriages will end in divorce and a significantly higher percentage of relationships will end in separation. In these situations assets have to be split in order to pass equal benefit to each partner. Life insurance plans are in most cases, if not all, impossible to separate. So if you have to single life plans this problem does not present itself as each life assured walks away with their own plan in tact.
You might be forgiven for thinking that arranging two plans in favour of one joint life insurance plan would be considerably more expensive and therefore make it financially prohibitive. This is not the case, in most cases arranging two life insurances plans for a couple need only cost approximately 10% more on the premium. Once this is taken into account paying an extra 10% more in premium is significantly worthwhile when assessing the overall benefits that you get from having the two plans over the one.
Of course, the best benefit of having two plans is the fact that you'll get twice the benefits. A joint life insurance plan offers only one payout, then the plan ceases to exist. On the other hand, if you both have a plan of your own, these plans are independent of one another. This means that each play will pay out on its own. Since two plans cost only about ten percent more, that's a lot more benefit in the end than cost. Financially, a pair of independent plans seems like a good idea.
So in summary having two plans over one means you do not have to reapply for life cover if one of the lives assured dies, you have a far more flexible arrangement should you separate and finally from a cost point of view, being on average only 10% more monthly but with twice the amount of life cover this type of arrangement is far more financially beneficial.
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