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  • Individual Term Insurance V/s Joint Life Term Insurance

    About Joint Life Term Insurance

    Term insurance planshave been around for many years, and offer pure risk protection at very affordable costs. However, as years have passed, more and more women have joined the workforce. As a result of which, it is common to find nuclear households where both spouses work to financially provide for the family. With this change in family income dynamics, it has become essential that due importance be given to both earning members in the family, especially the woman. Taking a hint from this changing trend, insurers have introduced a unique term life insurance product which covers a both partners jointly under a single term insurance policy. These policies are known as joint life term insurance policies and are offered by many insurers in India. The basic premise of a joint life term insurance policy is that the policy covers a couple as a whole under a single plan, and on the death of either spouse, the plan provides a sum insured payout to the surviving spouse.

    Features/Benefits of Joint Life Term Insurance Plans

    • Claim Payout Options – Joint life term policies offer a number of claim payout options to policyholders. For instance, some joint term policies make claim payouts on the first claim basis wherein the complete sum assured is paid to the surviving beneficiary in case of the death of one of the policyholder, following which the policy ceases to provide cover. Another option that can be chosen is to receive a certain amount of the sum assured on the death of each insured policyholder.
    • More economical - Joint life term insurance policies are often more cost effective compared to the premium cost involved in the purchase of two individual term insurance policies.
    • Easier to maintain – When it comes to insurance, it can often be difficult for one to keep track of premium payments. That hassle is doubled if a couple has two separate term plans. A joint term plan, on the other hand, helps eliminate this hassle, as it is a single plan which covers both individuals. Therefore, the hassle of maintaining two individual policies is eliminated here. Also, both partners can manage the account, which makes it easier to make premium payments on time.
    • Tax benefits – Just like any other life insurance plan, joint life term insurance plans also offer attractive tax benefits to policyholders on the premiums which they pay towards the plan. Also, the benefits received under the plan are also tax-free under the provisions of the Income Tax Act of 1961.
    • Additional benefits – Besides the above benefits, joint plan also provide other options in term of the claim payout. Under some joint term policies, the surviving spouse is eligible to receive a regular income for a specified duration, in addition to the sum assured death benefit which is paid on the demise of one of the insured partner. Some joint life term plans offer an additional amount of benefit, if one of the insured has passed away following an accident.
    • Riders available - Furthermore, certain joint term plans which have been introduced lately offer a number of additional benefits such as a built-in accidental death benefit (if death has occurred due to an accident), or a terminal illness benefit (where the one of the insured has been diagnosed with a life-threatening medical condition).

    How Do Joint Life Term Plans Work

    A joint term life insurance policy works similar to a regular term life policy. However, here, a single plan provides cover to two individuals, instead of just one. The premium paid towards coverage provided to the 2 people is combines as one. The coverage term for the policy is fixed, and premium payment is usually throughout the tenure of the policy. In case either of the insured partner passes away before the policy term expires, then the surviving partner is entitled to the um assured benefit amount.

    Payout Options Under Joint Life Term Insurance Plans

    When it comes to claim payouts, there are various options available under joint term insurance policies. In case of demise of one insured partner, and depending on the type of payout option that has been chosen, the surviving policyholder can choose from the following options:

    1. Receive the sum assured benefit amount in lump sum, following which the policy will terminate.
    2. Receive the sum assured benefit amount, after which the policy will continue, either with or without waiver of future premiums. The policy will terminate either when the last surviving insured partner dies, or the policy tenure gets over, whichever happens earlier.
    3. Some policies will provide the surviving insured policyholder with the life cover amount, along with regular payouts for a fixed time period.

    Joint Term Plans Versus Individual Term Plans

    Criteria Joint Term Plan Individual Term Plan
    Coverage Both partners are covered under a single policy. Each partner takes an individual policy.
    Sum Assured The collective sum assured is decided based on the yearly income of the policyholders. Both partners are usually covered under the same terms. Sum insured is decided based on the policyholder’s annual income.
    Death of one insured partner Depending on the plan that has been chosen, the payout will be made to the surviving partner. Policy continuance will depend on the type of plan that has been chosen. The complete sum insured amount will be provided to the nominee names in the policy, following which the policy terminates. The surviving partner continues to be insured as they are covered under a separate plan.
    Death of both insured partners If both partners have perished, the sum insured amount will be provided to the legal heir named in the joint life term plan. If both partners have taken individual policies, each policy will provide the sum assured payout to the legal heir named in the policy.
    Divorce In case of divorce, the insurer must be contacted to find out if the policy can be split to be continued. If both partners have taken individual term plans, then there is no change. Only change required in this case may be for the nominee details, in case the spouse has been named as the nominee under the policy.

    Suitability

    Joint life term plans Individual term plans
    These plans are suited for:
    • Partners who are of approximately the same age
    • Middle aged couples who want to save on policy premiums
    • Partners who have matching lifestyles – smokers, non-smokers, etc.
    These plans are suited for:
    • Those who have recently started working and are supporting dependents
    • Couples with a wider age difference since the combined premium may be lower than what may have to be paid by the older partner
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