Separating Your Life Insurance Policy

If you have bought, or are buying a property as a couple, it is pretty much accepted that life assurance is essential to ensure that the debt is cleared, or reduced if either of you were to die.

For simplicity this cover is usually sold on a 'joint life, first death' basis where the policy will pay out on the first death of the holders and the policy will then be cancelled.

Few people take advantage of the fact that each individual can actually take out separate life policies for the same sum assured.

Insurer's quotation systems often price these two policies in the same way for the risk and therefore it is possible to effectively get double the cover for the cost of a second policy fee - just a few pounds per month.

Why would you want to do this?

The main advantages are for couples with children.

If one of the parents were to die their policy would pay out but the survivor is left with a policy in place with guaranteed cover.

Even though the mortgage could be cleared you could argue that the risk on future second death is even greater, the survivor can choose to maintain the cover, reduce the sum assured (and premium) or dispense with the policy.

If both parents were to die, a joint life policy would provide enough cover to clear the mortgage but separate policies would produce two lump sums that can greatly benefit any surviving children and their guardians.

For just a few pounds more...

Another way of improving cover relatively cheaply is to extend the mortgage policy to provide additional protection for your partner or family.

Once the insurer has priced in a fixed policy fee, the remainder of the premium relates purely to the risk of claim. It is therefore possible to pay a few pounds more on the premium but get a disproportionate increase in benefits.

On death the mortgage could be paid off and there would be a capital sum to help the survivors in what is always a difficult time.

Buying your life assurance from a mortgage broker with access to a range of life providers and the experience to be able to advise you about these kind of advantages can pay dividends in cheaper cover and better value for money!