2 policies better than 1?

Thursday, 11th August 2011 10:49 - by Resident IFA

You and your Partner have just arranged a new mortgage and/or reviewed your existing protection arrangements. So, time to arrange/replace your Life (& Critical Illness) insurance in joint names? Perhaps it is not that straightforward...in a good, thought-provoking way. * Time to stop this entry for a moment, and to repeat myself from old. If you have an existing Critical Illness policy, it is very important to check the definitions contained therein. Quality in Critical Illness cover is a big pre-occupation of mine. There is absolutely no point in replacing a better policy with a worse one, all for the sake of a few pennies/pounds saved, or in simply taking a ‘different’ approach. * Right, now where was I? Yes, back to the Joint policy versus Sole policies debate. I’m merely looking here at the advantages of arranging two sole policies to protect your mortgage and/or family, not from the side of arranging the ‘usual’ joint policy. The 2 basic advantages are:  The potential for ‘double’ pay-out.  The ‘Choice’ factor. To elaborate:  I’ll give you a brief, cheerful (!) example of what I mean by ‘double’ pay-out. Were you both to die in the same (i.e.) car accident, a joint policy would provide the one benefit of, say, the cover level of £100,000. With 2 sole policies, both should pay; thus providing £200,000 (if both covering £100,000). The disadvantage of this is the slight increase in premium. Off the top of my head, a £30 per month joint policy might increase to a total monthly premium of £33 for 2 sole policies instead.  The ‘Choice’ factor refers to what happens were one of you to die in the aforementioned car accident. Holding just a joint policy, it pays out once and that is that. With 2 sole policies, if one of you survived, that person has the choice to continue paying for their policy – to provide ongoing family/debt/personal protection. How does this sound? More available choice is mostly good, in my experience. Your Independent Financial Adviser (IFA) will also, no doubt, speak of the importance and implications of placing the policies in Trust. This action can help in ensuring that the right money goes to the right person at the right time. Until next time...