Most joint life insurance policies operate on the basis that a pay out is made upon the first death.
In this instance, the pay out would usually be paid to the remaining spouse/civil partner who would then be exempt from inheritance tax.
However, if both partners were to die together or your policy was joint survivorship life insurance (when a pay out is made on a second death basis), the beneficiary would be subject to inheritance tax.
For this reason and to avoid the lengthy probate process, it would be beneficial to write your life insurance in trust even if it’s a joint policy.
There are also other considerations:
If you opt for a joint policy, it’s important to remember there will only be one pay-out.
So, if a married couple had a joint policy, and both died in a car accident, their dependents would only receive one lump sum from the policy. If however, the same couple had taken out individual policies, each one would make a pay-out.
Another potential downside of a joint policy is if a relationship breaks down; you cannot simply ‘split’ a policy. That means if one ex-partner decides they don’t want to pay their share of the premium, the policy would probably cease unless the other partner took on the full burden of paying.
With life insurance policies, if premiums aren’t paid, then the policy simply terminates.
There could also be issues over who is entitled to any pay-out from a joint policy, particularly if one of the former partners remarries and has children with their new spouse.
Having separate policies avoids this sort of issue. if a relationship does end, each partner had their own cover and can protect their dependants as they choose.