Joint Term Life Insurance

What Are Joint Term Insurance Plans?

You might come across a term plan with joint life option wherein two individuals can be covered under the same policy. Do you know what this joint term insurance is and how it works?

Joint term insurance plans are term plans which insure two individuals under the same policy.

If either of the life assured passes away, the plan pays a financial benefit to the other life assured. In some plans, the coverage might continue till the second life assured survives. If the second life assured also passes away, the death benefit is paid to the nominee and the plan is terminated. This will vary as per policy terms and conditions.

What are the types of joint life term insurance?

Joint life term insurance is a policy designed to cover two lives under one plan. It is commonly chosen by spouses or business partners who want to ensure that their dependents or associates are protected in case of unforeseen events. Depending on how the benefits are structured and when they are paid out, joint life term insurance plans are typically classified into the following types:

Based on Receipt of Benefits

1. First-to-Die Policy:

   
   

   Under this policy, the death benefit is paid upon the first death among the insured individuals. After the payout, the policy ends. This type is ideal for income replacement needs, especially in dual-income households. The benefit helps the surviving partner manage household finances without being financially burdened.

   
   

2. Second-to-Die Policy (Survivorship Plan):

   
   

   In this variant, the sum assured is paid only after both insured individuals have passed away. It t is commonly used for estate planning, asset transfer, or legacy creation.

   
   

   By understanding these types, you can choose the most suitable joint life insurance plan based on your financial goals, lifestyle needs, and the purpose of the policy.

   
   

Are Joint Term Insurance Plans Only for Spouses?

Joint term insurance is meant to cover individuals on a joint basis who have an insurable interest in each other’s life. Since married couples have insurable interests in each other’s lives, the coverage is also issued to them. However, it can also be opted by a parent and their child.

Who Should Get Joint Term Insurance?

Married couples can get joint term insurance coverage so that both of them are insured under a single policy. This would be easy to manage and might also prove cost-effective. Joint life term plans can also be co-owned by a parent and their child, to protect the child financially in the event of the parent’s untimely death or vice versa.

How Does a Joint Term Insurance Plan Work?

Under a joint term insurance plan, the individuals to be insured first make a proposal for coverage. One will be the primary life assured and the other will be the secondary life assured. They choose the sum assured, policy tenure, premium paying tenure and frequency of premium payment. For the sum assured, there might be two options –

• The joint lives are covered for the same sum assured. This means that both the primary and secondary lives are insured for the same sum assured.
• The primary life assured is covered for 100% of the sum assured and the secondary life assured is usually covered for 50% of the sum assured. You can check with your insurer for more details. The premium of the policy is paid over the chosen premium payment tenure and as per the chosen frequency. The benefit payouts under the policy can be in the following manner –
• If any one of the lives covered under the plan passes away during the policy tenure, the applicable sum assured is paid. The plan is terminated and the surviving life assured does not get coverage for the chosen tenure.
• If any one of the lives covered under the plan passes away during the policy tenure, the applicable sum assured is paid. The plan continues till the chosen tenure or till the death of the surviving life assured, whichever is earlier. On the survivor’s death during the policy tenure, the death benefit is paid to the nominee.

In the second option, wherein the coverage continues after the death of any life assured, there are premium payment options too offered by joint life plans. Have a look –

• The surviving life assured pays the premium over the remaining tenure or till their demise, whichever is earlier.]
• The surviving life assured pays a reduced premium over the remaining tenure or till their demise, whichever is earlier.
• The premium is waived but the coverage continues

Thereafter, if the plan matures and the surviving life is alive, the plan is terminated and no benefit is paid. However, if the return of premium option is selected, the premium is refunded back.

How Is Joint Term Insurance Plan Different from Another Insurance Plan?

Here are some ways how joint term insurance is different from other types of insurance plans –

Reasons to Consider Joint Term Insurance Plan:

Some of the reasons to consider a joint term insurance plan are as follows –

• If you want one policy for two individuals with insurable interest in each other’s lives, the plan can be a good choice
• Joint life term plans may be cost effective and easy to manage. While the savings on premium may not be less, still it might seem convenient to opt for a single plan rather than two.
• If you want to save premium on two different policies for yourself and your spouse, you can choose a term plan with joint life option and save on the premium
• If you want to service one policy but want coverage for two individuals, joint term insurance can be a good choice

What Are the Benefits of Joint Term Insurance?

Some of the benefits of joint term insurance plans are as follows -

• Cost-effectiveness

  
  

  Compared to buying two independent policies for two individuals, the joint life plan can offer lower premiums. This helps you save on the premium outgo and enjoy cost-effective coverage.

  
  

• Tax benefits

  
  

  Like other life insurance policies, joint life plans also offer tax benefits. The premiums paid, up to 10% of the capital sum assured1 assuming the policy is issued on or after 1st April 2012, are allowed as an income tax deduction u/s 80C up to a limit of Rs.1.5 lakhs. For policies issued prior to this date, premiums up to 20% of the capital sum assured will be allowed as an income tax deduction. For policies issued on or after 1st April 2013, if the life insured suffers from a disease or disability defined under Section 80DDB or Section 80U, premiums up to 15% of the capital sum assured will be allowed as an income tax deduction1. The maximum deduction limit, however, is Rs.1.5 lakhs. This benefits are available only for persons opting for old regime of Income Tax.

  
  

  Moreover, the death benefit received from the policy is also completely tax-free. Maturity benefit received is also tax free subject to satisfaction of conditions mentioned under Section 10(10D) of the Income Tax Act 1961. If conditions under Section 10(10D) are not satisfied, gain from such policy on maturity will be taxable in the hands of recipient.

  
  

• Children's dreams

  
  

  For couples having children, a joint life policy can help in fulfilling the children’s dreams. As the policy pays a benefit if either or both parents pass away (depending on the policy chosen), the benefit can provide the financial means for the child’s higher education, marriage and other financial needs.

  
  

• Family's lifestyle maintenance

  
  

  If you choose a policy that pays the sum assured if either of the insured partners passes away, the surviving partner gets financial assistance in the other partner’s absence. This financial assistance allows the surviving partner to take care of the family’s lifestyle needs.

  
  

• Easy to service

  
  

  Instead of two independent policies, a joint life policy is also easy to service. There is one premium payment date to remember which makes it easier to pay the premiums on time.

  
  

Process to Buy Joint Term Insurance Plan

You can buy a joint term insurance plan in either of the following two ways –

• Online

  
  

  Many insurance companies offer an online mode of policy purchase. You have to fill out an online application form, pay the premium online and get covered.

  
  

• Offline

  
  

  The offline mode includes buying the policy from the insurer’s branch office or through an intermediary. You will have to fill out a physical application form and pay the premium via cheque, demand draft, cash or other modes.

  
  

Why Should You Consider Joint Life Insurance Policies?

Joint life insurance policies can be a practical and cost-effective solution for couples looking to secure their loved ones’ financial future. These policies provide life cover to two individuals under a single plan.

Pros:

1. Affordability: One of the biggest advantages is affordability. A joint policy generally costs less than two individual plans, making it attractive for couples.
2. Estate Planning: A second-to-die (survivorship) policy helps in estate planning. It pays out after both policyholders pass away, giving the surviving partner more time to manage assets or even encash the policy if needed.

Cons:

1. Limited Coverage After One Demise: In first-to-die policies, coverage ceases after the first death. The surviving individual may need to buy a new plan, usually at a higher cost due to increased age.
2. Health-Based Premiums: Premiums are calculated based on the combined health profiles of both individuals. If one person has pre-existing conditions or is a smoker, the premiums for both may increase.

Hence, while joint life policies offer convenience and savings, they may not suit everyone, especially if the two individuals have different coverage needs or health statuses.

How to Choose the Right Joint Term Life Insurance Policy?

Choosing a joint term life insurance policy requires thoughtful evaluation of your current financial status, future goals, and partner’s health. Here are key factors to consider:

1. Assess Your Needs:

   
   
   • Coverage Amount: Ensure the death benefit is enough to cover outstanding debts, education costs, and lifestyle expenses for your family.
   • Policy Term: Align the term with key milestones such as your retirement age or your child’s graduation.
   • Riders: Look for add-ons like critical illness benefit rider or waiver of premium etc that enhance your protection at a minimal cost.
   
   

2. Compare Different Plans:

   
   
   • Check features such as the option for payouts after the first or second death, maturity benefits, or income replacement.
   • Review claim settlement ratios of different insurers and check for exclusions.
   • Compare the premiums and ensure they align with your long-term budget.
   
   

3. Other Key Considerations:

   
   
   • Health Disclosures: Transparency in medical history is crucial for hassle-free claim processing.
   • Seek Expert Advice: A financial advisor can help you select a plan that aligns with your family’s protection goals.
   
   

Difference Between Term Insurance and Joint Term Insurance

While both plans aim to offer financial security, term insurance and joint term insurance differ in structure, coverage, and flexibility. Here’s a brief comparison:

A term insurance policy covers a single individual and is best suited for those with independent financial responsibilities. This means the policy is tailored to protect the specific financial obligations that one person alone carries, such as individual income replacement, or supporting dependents. On the other hand, joint term insurance covers two individuals—usually spouses—under a single plan. This option is cost-effective and convenient for couples who share financial goals and responsibilities, such as raising children or managing joint debts, by providing coverage that reflects their combined needs.

Conclusion

A joint term life plan is a good choice for any two individuals having insurable interest in each other’s life, as it insures two lives in a single policy and provides financial security. You have the flexibility to choose the sum assured, type of coverage needed, premium payment details, coverage duration, etc. to design a policy that matches your financial needs. So, understand what joint term plans are all about and buy them if they align with your financial planning.

FAQs

1. Is a Joint term insurance plan expensive?

   
   

   The premium of a joint term insurance plan depends on a lot of factors like the insured individuals’ age, sum assured, tenure, past and present medical history, etc. It is a cost-effective way to insure a couple.

   
   

2. If both of the life assured die who gets the sum assured?

   
   

   If both the life assured die, the sum assured is paid to the appointed nominee or the legal heirs if there’s no nominee.

   
   

3. Who should get a joint life policy?

   
   

   A joint life insurance policy is usually suitable for a married couple.

   
   

4. What are common riders available for Joint Term Life Insurance?

   
   

   Common riders include:

   
   
   • Accidental Death Benefit: Payout for death due to an accident subject to rider terms and conditions.
   • Critical Illness Benefit Rider: Payout is given if a critical illness covered under the rider is diagnosed and subject to terms and conditions of the rider.
   • Waiver of Premium Rider: Future premiums waived if one insured becomes disabled and subject to terms and conditions of the rider.
   
   

5. How much does a Joint Term Life Insurance Policy cost?

   
   

   Premiums depend on age, health, coverage, term, and riders for both individuals. Joint policies are usually more affordable than two separate plans, especially for young, healthy couples.

   
   

6. Is it better to get a joint life policy instead of separate plans?

   
   

   The best choice depends on your financial goals and individual needs. Joint policies are cost-effective and can be convenient for couples.

   
   

7. How is the death benefit payable in a joint life policy?

   
   

   The death benefit is paid when one insured person passes away. The payout goes to the surviving partner or nominated beneficiary, as per the policy terms.