Joint protection policies: simple now, but awkward later?

Life insurance or critical illness cover can be a brilliant way to protect your family’s financial future.

Life insurance pays out if you die during the policy term.

Critical illness cover pays out if you are diagnosed with one of the serious illnesses covered by your policy and meet the insurer’s definition.

You can arrange life insurance on its own or combine it with critical illness cover. You can also choose whether each person has their own policy or whether a couple is covered jointly.

That choice matters more than you might think.

One mortgage.

Two people.

One joint policy.

It sounds perfectly sensible.

It may cost a little less, there is only one policy to manage and the cover can be set up to match the mortgage.

So why have I never recommended a joint policy?

Because protection is not only about what works today.

It needs to work when life changes too.

Let’s start with the positives

A joint protection policy is not automatically a bad idea.

It may:

• Cost less than two separate policies
• Feel simpler to manage
• Match a shared mortgage
• Pay out if either person dies or, where included, suffers a qualifying critical illness

If money is particularly tight, joint cover may be better than having no protection at all.

But the saving is often not as large as people expect — and you need to understand what you may be giving up in return.

Two people covered does not usually mean two payouts

Most joint policies designed to protect a family or mortgage pay out following the first successful claim and then end.

With joint life cover, that would normally be when the first person dies.

If critical illness cover is included, the policy may end after either person makes a successful critical illness claim.

So, although two people are named on the policy, there is usually only one payout.

With separate policies, each person has their own cover.

If one person claims, the other person’s policy can remain in place.

That difference may not seem important when you are young, healthy and arranging your first mortgage.

It can feel very important later.

Life rarely sticks to the original plan

People often think the biggest problem with joint cover is divorce or separation.

That can certainly make matters complicated — but relationships are not the only thing that can change.

You might:

• Move home
• Extend your mortgage
• Have children
• Need different amounts of cover
• Want your policies to end at different times
• Change jobs or working patterns
• Develop a health condition

And once your health changes, arranging new cover may become more expensive, come with exclusions or sometimes become almost impossible.

This happened to me

I have always had separate life and critical illness cover from my husband.

Many years ago, we remortgaged, increased our borrowing and extended the mortgage term. At around the same time, I was diagnosed with something quite nasty.

Suddenly, getting brand-new cover for me was extremely difficult.

Thankfully, our protection was not all tied together in one joint policy.

My husband could take out a brand-spanking-new policy with more cover and a longer term, while I kept the valuable cover I already had.

I have also been able to adapt my own protection cover over time where possible.

Nothing had happened to our relationship.

Life had simply changed — and having separate policies gave us more options.

But surely joint cover is cheaper?

Usually, yes.

But two separate policies do not automatically cost twice as much as one joint policy.

The difference between the cost of a joint policy and the combined cost of two individual policies is often much smaller than people expect.

For that additional cost, two separate policies can provide:

• Individual cover for each person
• The possibility of two payouts rather than one
• Different amounts of cover
• Different policy lengths
• The ability to change one person’s cover without disturbing the other’s
• More flexibility if your health, family or finances change

One provider does not even offer traditional joint policies. Instead, it keeps each person’s cover separate from the outset — one application and one Direct Debit, but individual protection that can remain in place if the other person claims.

The cheapest option is not always the one offering the best value.

It does not have to be all or nothing

Having separate policies does not mean both people must have identical cover.

One person may need more life cover because they earn more.

The other may need more critical illness cover because they provide more unpaid care at home.

One policy may need to last until the mortgage ends, while another may need to continue until the children are financially independent.

Separate cover allows each policy to reflect the person it is protecting.

Protection should support your life — not just copy your debt

This is where there can be a real difference between simply arranging a protection policy and working with a financial planner.

It is very easy to look at a £300,000 mortgage and arrange £300,000 of joint cover for the same length of time.

But financial planning goes further than simply mimicking the debt.

I want to understand:

• What would happen to the family’s income?
• Would either person want or need to reduce their working hours?
• Who would provide childcare or unpaid care?
• How would the household cope with additional costs?
• What other savings, workplace benefits or policies are already available?
• What might change during the years ahead?

The mortgage matters, but it is only one part of your financial life.

Good protection should support your whole financial journey.

The question is not just “What does it cost?”

It is also worth asking:

• What would each of us actually need if something happened?
• Should we both have the same amount of cover?
• How long does each person need protection?
• What happens to the other person’s cover after a claim?
• Could we adapt the policies if our circumstances changed?

A joint policy may still be suitable once you have considered all of that.

But it should be a conscious decision — not simply the automatic choice because you have a joint mortgage.

Personally, I usually prefer each person to have cover that belongs to them and can adapt with them.

Because life changes, and good protection should give you choices when it does.

We cannot predict the future.

But we can plan for it.

Although the content of the article was correct at the time of writing, the accuracy of the information should not be relied upon, as it may have been subject to subsequent tax, legislative or event changes.