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  • Joint Term Plans v/s Two Individual Term Plans

    Term insurance is a fairly common concept that many people are aware of. However, not many people are aware of joint term life insurance, which is a relatively new insurance product to be introduced in the market. Term plans are one of the most common types of life insurance opted by millions of people around the world, owing to its attractive benefits. Once can get a high amount of sum assured as cover at very nominal or reasonable premiums for a fixed time period of 5 to 30 years. Since they offer the simplest form of risk protection, against the risk of death, they are also known as pure risk protection plans.

    What is Joint-life Term Insurance?

    The concept of joint term insurance is a recent one which started becoming popular after more and more women began to join the workforce and contribute to the household’s income. This has given rise to the need for both partners to be insured, and that is exactly what a joint term insurance plan does. As the name suggests, this is also a term insurance plan with the only difference being that both partners are covered under a single policy. If either of the partners covered under the policy dies suddenly before the end of the policy term due to a cause that is listed in the policy, the surviving spouse is entitled to the death benefit sum assured.

    How this plan works

    The working of a joint life term policy is similar to that of a regular term insurance policy. The only major point of difference between these two policies is that while a term plan will cover a single individual, a joint term insurance plan covers two individuals under the same plan. Besides that, most other aspects are same as a term plan i.e. coverage tenure is fixed, premium payment for both partners is combined, and premiums are paid on a regular basis. If either of the insured individuals dies before the policy term ends, the surviving partner gets the death benefit payout.

    Claim payout options

    In terms of claim payout, joint term plans usually offer multiple options. These include: (i) If either of the policyholders passes away, the surviving policyholder gets the sum assured as death benefit in a lump sum after which the policy ends;

    (ii) After the death of one policyholder, the sum assured is paid to the surviving policyholder and the policy continues to provide cover till the end of its term, or till surviving policyholder dies, whichever takes place sooner. Under this option, the future policy premiums may or may not be waived after one policyholder’s death;

    (iii) After the death of one policyholder, the sum assured is provided to the surviving policyholder as death benefit in a combination of lump sum and regular payouts for a fixed duration in the future.

    Benefits of Joint Life Term Insurance

    • Save money on premiums

    Even though term insurance is known to be available at very affordable and low premiums, the premium outgo for two individual term plans will still be higher in comparison to that of a joint term plan. This is the reason why joint term plans are a wiser option for couples who are looking to get covered under a term plan and save on premiums at the same time.

    • Multiple claim payout options

    When it comes to claiming payout, joint term plans have a number of options that policyholders can choose from. Just like no two individuals will have the same requirement, the same way, the same payout options may not be suited for everyone. For greater customisation, joint term plans will usually give policyholders the flexibility to choose from an option that closely first their requirements.

    • Tax savings –

    Similar to other types of life insurance, joint life term insurance plans also come with tax benefits which policyholders can avail. The premiums paid towards the plan are eligible for tax deduction, as are the benefits which the plan provides, under the provisions of the Income Tax Act, 1961.

    • Riders available –

    Like any other type of life insurance plan, joint term plans are also available with riders, which can be purchased over the plan, to enhance its coverage. The accidental death benefit rider (cover against the risk of death caused due to an accident) and terminal illness benefit (if insured is diagnosed with a critical illness, the rider benefit is payable) are two of the most commonly available riders that you can opt for with a joint term plan. The rider premium is over and above the premium charged for the base plan.

    • Easy maintenance –

    Timely premium payment is crucial to ensure that you are never left without insurance coverage. However, doing that may sometimes be a tad challenging. However, with a joint term plan, that is no longer a worry as there is only one policy for which premiums have to be paid, instead of two. Also, since both policyholders are given access to the policy account, either one can make the premium payment, in case the other one may have missed doing so.

    Joint term insurance or Individual term insurance: Which should you go for?

      Joint Term Plan Individual Term Plan
    Coverage A single plan will cover both partners for a fixed period of time A single term plan can only be taken by a single individual. It does not cover more than one person
    Sum Assured
    • Sum assured is combined for both policyholders
    • Amount of sum assured will depend on the annual income of each policyholder
    • Terms of coverage will be the same for both policyholders
    The sum insured is set based on the policyholder’s yearly income
    Premium Premium payment is combined for both policyholders. There is no arrangement to pay premium individually for each policyholder Policyholder pays premiums in exchange for coverage
    Who is it fit for
    • For couples with little difference in age
    • For mid-aged partners who wish to save on life insurance premiums
    • Couples where both partners have similar lifestyles and lifestyle habits – teetotallers, non-smokers, etc.
    Term plans are ideal for anyone who is looking to get affordable coverage for their dependents. Ideal candidates would be young parents, newly married couples, young people supporting dependents like siblings, or aged parents, etc.
    If one insured policyholder dies The sum assured death benefit will be paid to the surviving partner. Policy continuance and waiver of future premiums will depend on the claim payout option that the policyholders have opted for Since there is only a single policyholder, in this case, the sum assured will be given to their beneficiary, after which the policy will cease to provide cover. Since the remaining partner is covered under a separate term plan, they will continue receiving cover.
    If both policyholders die In case of death of both policyholders, the legal heir named in the policy will be entitled to the sum assured death benefit according to the claim payout option chosen In the unlikely event that (i) both partners die, and (ii) the spouse has been named as the nominee in each of the two policies, then the sum assured from each policy will go to the legal heir as per the policy document
    If both policyholders are divorcing If permitted by the company, the policy may be split. Contact your insurer to explore this option Since both partners have individual policies, they may only have to change the nominee details, if required
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