Worldly goods

As the wedding season flourishes, Iain Morse takes a close look at the best ways partners can plan their future finances

June and July are record months for wedding chapels and register offices. This is the time of year when so many of us want to get married. Plenty of planning goes into wedding ceremonies, receptions and honeymoons, but what about the longer-term financial issues involved in tying the nuptial knot?

"Marriage or long-term partnership throw up very similar financial planning issues," says Richard Hunter, a financial adviser at Holden Meehan, a London-based firm. "So if you are settling down together, it pays to put together a checklist.

"You may not be able to afford all of these but consider personal protection, any mortgage arrangements, and matters such as planning for the cost of bringing up children.

Life cover and insurance against ill health are an obvious place to start. The good news here is that policies underwritten on a "joint life" basis, insuring both husband and wife, are usually cheaper than single policies taken on separate lives.

"If you are starting out, and on a tight budget, think about taking a family income benefit (FIB) policy," says Mr Hunter. "This is a special type of policy designed to pay a lump sum each year over the policy term as a replacement for lost income."

FIB is often cheaper than alternative forms of life cover. For instance, for a man aged 31, and woman aged 25, Norwich Union offer a joint life, first death policy paying pounds 20,000 a year over 20 years, for a monthly premium of just pounds 54.37. Separate policies on the same terms would carry respective premiums of pounds 28.77 and pounds 29.85 a month, a total of pounds 58.62.

Norwich Union's Andrew Stronach says: "Some of the savings on a joint life policy are the result of there being a single policy charge included in the premium." Policy charges can vary from as little as 75 pence up to pounds 3 or pounds 4 per month. "Other factors include underwriting experience of married couples tending to live longer and enjoy fewer serious illnesses than singles. This can make couples a better, cheaper risk."

The exact terms under which life policy pays out also need careful consideration. Taking a policy on a first life basis means a surviving spouse will benefit immediately.

"First life underwriting costs more than second life but in the cases both of life cover and various forms of insurance against ill-health, a first death policy may be of more immediate, practical help," says Mr Hunter.

Simple term assurance can also be less expensive on a joint life basis. Norwich Union would offer the same couple first death cover of pounds 100,000 over a 25-year term, for a monthly premium of just pounds 18.80. But the same cover taken through two single life policies would cost pounds 13.60 a month for the man, and pounds 10 for the woman, giving a total monthly premium cost of pounds 23.60, or an extra pounds 4.80.

Critical illness benefit (CIB) pays a lump sum on the diagnosis of any from a wide range of potentially life threatening illnesses such as cancer, stroke or heart attack. Mr Hunter says: "Interest in this type of insurance has grown hugely in the last few years. State benefits have steadily diminished and fewer of us are entitled to employee protection from company pension schemes."

CIB can be bought "bolted on" to a term policy, as part of an endowment savings plan designed to repay a mortgage, or on a "free-standing" basis. Shop around to find the most competitive deal, and remember that composite policies - those underwriting more than one type of risk simultaneously - may be more expensive than the similar cover purchased separately from different providers. Tunbridge Wells Equitable Friendly Society offers free-standing CIB policies. Premiums for a benefit of pounds 50,000 over 25 years are pounds 21.51 and pounds 12.63 per month respectively, but a joint first- life policy on the same terms would cost just pounds 30.64.

There are also ways to combine term assurance with long-term savings and even a "whole-of-life policy", which can run for as long as you keep on paying premiums. Term insurers will not give cover beyond the age of 75, while whole-of-life policies have no fixed term.

"With more and more of us living past 75, this is worth thinking about," says Mr Hunter. "The surviving spouse, who is often the wife, may be likely to face relative hardship due to at least some loss of pension income."

Examples here include Standard Life's Variable Protection Plan, which combines term assurance and a "with-profits" saving policy to give "whole- of-life" cover. With a sum assured of pounds 100,000, this would cost our couple pounds 60:60 on a first death basis and just pounds 20 per month on a second death basis.

"Putting the right insurance cover in place early cuts costs and brings peace of mind," says Mr. Hunter.