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Are joint life policies the way to go for married couples?

Published

2020

Tue

03

Mar

Schalk Malan, Chief Executive Officer at BrightRock

 

Having life insurance cover is definitely something married couples should prioritise, and some think that having a joint life policy means better premiums and less hassle. But there are a few other factors couples must consider before committing to bundled life cover.

 

To bundle or not to bundle, that is the question

The bundling of life insurance means that both spouses are insured on a single policy. This used to be a common practice in South Africa; however, now that there is no longer a tax benefit attached to it, fewer couples are opting for joint life insurance.

 

In my view, it’s never a good idea to have a bundled life policy. Although having one policy can mean less initial paperwork and administration, and potentially help with a small saving on the policy administration fee, there are no real advantages to it.

 

When thinking about any kind of insurance cover, the most important factor should be the needs and circumstances of each individual. Because everyone’s needs are different, having a joint life policy simply cannot give the best cover to both spouses.

 

If the relationship breaks down, the cover becomes complicated

Another point to consider when thinking about bundling your life cover is what will happen in the case of divorce. Obviously, no couple on the brink of spending their lives together likes to think about the potential demise of their relationship, but this must be taken into account when committing to life cover.

 

If a couple decides to separate or divorce and they are insured on a single joint life policy, they won’t be able to divide up the policy. This means that if one ex-partner decides not to pay their share of the premium, the policy will probably cease unless the other former spouse takes on the burden of paying the full amount. The person who owns the policy can also decide to withhold policy pay-outs, as well as change the beneficiaries of the policy, without needing the consent of their former partner.

 

With bundled life cover, one ex-spouse can also affect the amount of cover their former partner will be allowed to purchase after the divorce, as insurers may not be inclined to allow them to add more cover. There may also be decreases in the amount of flexibility, as both spouses’ cover may need to have similar features.

 

Value for money and sound financial advice are key

When committing to any kind of insurance, I always advise people to make sure that they get as much cover as possible for their premium – value for money needs to be the focus, rather than just the premium or cover amount. Often, a cheaper premium initially could mean that your cover might not meet your needs later on. This is why it’s vital to consult a qualified financial adviser, as he or she can help you understand the impact of choosing a joint life policy versus a single life policy for each spouse.

 

 
Source: Lesego, Hill+Knowlton Strategies
 
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Mortality Table:

A listing, by age, of the probable death rates and certain other derived values, of a homogeneous group of individuals based on actual experience over a period of years. The table shows the assumed number of individuals left alive at each subsequent age from a given age group.
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