Not sure whether you should buy a joint term insurance or two separate term insurance policies as a couple? This article will wipe out all the fogginess and bring you face-to-face with the best option for you as a couple.
My cousin brother got married recently. He's a chartered accountant by profession. He knows that insurance is the best way to stay financially covered. And that a term plan is a must to provide financial security to his family.
But the question he asked me – “Whether I should opt for a joint term insurance policy or two different term insurance plans?” has made me write this blog post.
Quite a question. A tricky one. The answer to that tricky question is undoubtedly subjective. However, I did my best to make him understand what may be the best suitable option for his family.
What should you do as a married couple when it comes to buying a term insurance plan?
My brother acknowledges the importance of term insurance plan and its benefits.
But he had lined up few questions for me to answer, for instance:
Is there a term plan for a couple?
Yes, as a married couple, you can opt for a joint life insurance plan. Alternatively, you can opt for two separate term insurance plans. The dilemma whether a joint term insurance or two separate term insurances got him even more confused.
I told him, let me tell you the difference between a joint term insurance plan and two separate term plans. And then, we will be moving further with all the pros and cons of each. Finally, you will be in a position to decide which one to opt.
What is a joint life term insurance policy?
A joint term insurance simply helps you to cover yourself and your significant half in a single policy.
Great option, isn't it?
Having said that let me tell you why this plan was introduced in the first place.
Term life insurance is meant to cover the risk of untimely death of the life assured. When first the term insurance was introduced, it was meant to provide financial security to the family of the breadwinner – targeted towards the earning member of the family out there looking to support their family in case of uncertain eventualities.
Term insurance plans are looked up as a source of income replacement if a breadwinner passes away, which otherwise leaves the family in an emotional distress and financial crisis.
Nowadays, more and more women are working and contributing to the family. Since both the partners are contributing to the family's financial needs, insurance companies faced with an increasing demand to come up with a term plan covering both the partners in a single policy. This was done and executed effectively by launching a joint term life insurance plan.
Now, as a married couple you can also cover your spouse in a single policy, by opting for a joint life cover.
There are many life insurance companies in India that offer joint term insurance plan. But may differ in their terms and conditions.
How a Joint Term Insurance plan works?
Both the partners – life assured are covered in a single policy and pay a combined premium. The policy tenure is fixed at the time of purchase and throughout the period premium is paid. If during the policy tenure any of the partner passes away, the surviving partner gets the life cover amount.
There are different variants available under the joint term plan offered by insurance companies.
Some companies pay the sum assured (life cover amount) as lump sum amount to the surviving partner and the policy terminates. While, in some cases, the policy continues with or without waiver of the premium, and terminates when the last surviving partner passes away or policy period ends, whichever happens first. While, some companies may offer a scheme where the company pays lump sum amount at the time of claim if any of the partners passes away, and also continue to give monthly payouts for a fixed number of years.
Let's see an example of a comprehensive Joint Term Insurance plan
Rajesh and Savitri bought a joint term insurance. At the time of purchase, Rajesh was at the age of 30 years and his wife 28 years. They opted a term period of 30 years with a sum assured of Rs.1 crore.
If any of the life partners passes away during the policy tenure, this is how a term insurance company will pay the benefit to the nominee/surviving partner:
Let's say, Rajesh passes away in the 5th year of the policy purchase, the insurance company will pay Rs.1 crore to the nominee, Savitri, the surviving partner. And will continue to pay monthly payout for 5 years at the rate of 1.75% of sum assured. That means, a sum of Rs.1.75 lakh every month for 5 years. This way the total payout will be Rs.2.05 crore.
The policy will terminate after the payment of all monthly income benefits to the surviving partner.
Please note this is an indicative example of a joint term plan offered, which may vary in terms and conditions from insurer to insurer those who offer a joint term insurance plan.
|Payout at the time of claim||After claim up to 5 years||Total sum assured|
|Rs.1 crore||Rs.1.75 lakh/month||Rs.2.05 crore|
As I was explaining this to my brother, he popped me another question with raised eyebrows:
"What if the surviving partner dies during the monthly payout period?"
The monthly payment will continue to be paid to the legal heir(s) as mentioned in the policy.
"What if both the partners die together in an event?"
In that case, the death benefit will be paid to the legal heir(s) as mentioned in the policy. However, there will be no monthly payout. That is, the death benefit will not be made double in such a case.
"What if the married couple get divorced?"
In case of a divorce, one can't divide the sum assured or the policy into two. That said, any one of the partner will be paying the full premium amount if he/she wishes to keep the policy in force.
So, one may want to talk to the insurance company to avoid any of such problems and must check whether the insurance company offers a joint term insurance policy with the right to split the policy in case of a divorce. And if not, what is the possible solution.
I told, if both are covered under two separate term insurances, such issues would be out of question.
How to Select the Best Joint Term Insurance?
Go online. Do any of the following:
1) Visit different life insurers on their website that offer a joint term insurance. Read the brochure, check all their features, benefits, inclusions and exclusions and select the suitable one.
2) Visit any web aggregator online. Select term insurance, give the required info of yourself and of your partner, select term period, sum assured (coverage), compare. Online web aggregators give the option of comparison of different term insurance policies on a click. You can compare term insurance policies online and then select as per your needs.
How to Get Joint Term Insurance Quotes Online?
Visit any web aggregator online. Select term insurance, give data of yourself and of your partner, select term period, sum assured (coverage), and select compare.
This was all about a joint term insurance.
As I explained the details of joint insurance, my brother was like a deer caught in the headlights. However, I asked him to wait before concluding anything. Now let's see both sides of the coin, in order to decide whether you need a joint life term policy or two separate term insurance policies for yourself and your spouse.
Let me share the difference between having a joint term insurance or two different term insurances.
Joint Term Insurance or Two Separate Term Plans
Before buying, one should examine family's requirements, consider the pros and cons of both types of policies. There's no hard and fast rule in buying either of them, it totally depends on one's needs and vary from family to family. Consider the following points when choosing between a joint term plan and two separate term plan.
Quick glance on the difference between a joint term plan and two separate term plan:
|Key Points||Joint Term Plan||Two Separate Term Plan|
|Who can be covered?||Both in a single policy.||Both under two different term plans.|
|Freedom to choose sum assured||Depends on the annual income of the policyholder. Mostly, both are covered on the same terms.||Depends on the annual income, unless both the partners have same income, sum assured may vary. Each spouse can select as per the needs.|
|What if any one of the life assured dies?||Full payout of sum assured, and possibly more, depending on the plan scheme. If policy terminates on death of any partner the surviving partner is uninsured or may have to buy another policy at an older age with higher premium to stay covered.||Full payout of sum assured and policy of that life assured terminates. The other partner stays insured because both the policies are different. No need to buy another term insurance policy at a later stage of life to stay covered.|
|What if both the partners die?||Single payout of sum assured to the legal heir(s).||Double payout from both the term insurance policies to the legal heir(s).|
|What if couple gets divorced?||One needs to talk to the insurance company about whether the policy could still be worked around or could be split to keep in force.||Won't impact the policy, except the fact that one may need to change the name of the nominee in the policy document.|
|Suitability||1. It is suitable for middle age couples, as buying two different policies in middle age may have higher premiums which is not advisable.
2. It is also suitable for couples not having much age differences.
3. Preferably, for couples living same lifestyle, as smoker or non-smoker, else the premium would be higher for both even when one of the partner doesn't smoke.
|1. It is advisable to opt at young age, as the premium will be lower.
2. It is also suitable for couples having big age gap between them. Because then the overall premium paid will be far lower and will be as per the age and sum assured.
3. It is suitable if any of the partner is not a non-smoker, in which the premium and sum assured could differ.
|Ideal for||If any of the partner is a homemaker or have a low income.||If both the partners are working and have more or less same annual income.|
Final verdict on a joint term insurance plan or two separate term plans - which is better?
Both the options are better but only when chosen wisely as per the needs and requirement.
A joint term insurance has got its own pros and cons, and so does having two separate term plans. It is advisable to understand your family's needs before opting any one of them in hurry.
Take help of online term insurance comparison tools to compare different aspects of term insurance, be it an individual term plan or a joint term insurance plan.
Take time and evaluate. Consult experts, if in doubt.
Select carefully. Choice is yours. Make it a good one.