Is two lives better than one?

By THIS IS MONEY
Updated:

 

We are aged 44 and 39 and have term insurance that will run for another ten years. Is it possible to take out a new joint life insurance policy to cover the rest of our lives, or do we have to wait for this one to expire? KS

Kevin Carr, senior technical adviser for LifeSearch replies: When it comes to life insurance you can pretty much have as many policies as you like. Of course, it would be sensible to limit yourself to a number that you can afford.

You have two options here, you could either take out a policy to replace the existing one and cancel the one you have, or take out an additional policy without cancelling the current policy. It may be advisable to keep the current policy if you have an investment element with a surrender value. The surrender value could mean that you are not left with much and in this case it would be better to let the current policy run its course. If, however, you have no surrender value then there is no reason why you should not buy a replacement policy to save money or to reflect any changes in your needs. Make sure the new policy is in place before you cancel the old one, just in case you run into difficulties.

You can choose from either a whole-of-life policy, which has no time limit, or a term policy, which covers a fixed period of years and is less expensive as a result. If you have dependants and want to shield them from any potential inheritance tax bill then it would be in your interests to consider a joint-life whole-of-life policy, which pays out when both of you die. If not, then go for two term insurance policies, as they are cheaper.

At present you can get two term insurance policies for almost the same price as a joint policy, which is good value for money. The added advantage of having two individual policies is that should anything happen to both of you they will both pay out, whereas a joint policy will pay out only once.

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