Topic 2: Joint Term Life Policies – Who can Buy?

A husband and wife are supposed to share everything. Why not a life insurance policy?

Especially if sharing can lead to lower costs and better benefits, it becomes even more necessary to take such wise decisions. To help a couple save some costs without hurting their risk coverage, few life insurance companies have launched joint life term plans.

To be eligible for these plans, both the partners have to undergo medical tests and give proof of their income along with all the necessary documents required to buy a term plan in India. Catering to individual needs and requirements, the insurers have come up with various plans and products with different features. To make it easier for you to understand, the following are the two main kinds of plans:

1) In the first scenario, if either of the insured passes away during the term of the policy, the sum assured will be paid to the survivor spouse and the policy will lapse. These are also called Single Payout Policies and usually, attract extremely low premiums.

2) In the second scenario, the insurance company will pay the death benefits to the surviving spouse, and the policy will remain active. The surviving spouse will be able to continue with the policy for the same sum assured or reduced cover and premium depending on the type of plan they have bought.

These were the basic types of plans. Now let’s see how different features make various plans work in a variety of ways:

1) In case the couple bought a joint life term plan in India for an amount of Rs. 1 crore, at the death of husband, the wife will be paid out the sum assured as a death benefit. After that, the policy will cease. However, in some other policies, the insurer may waive off, the future premiums while reducing the sum assured on the wife to 50% of the total value. In some cases, the insurer might pay 50% of the sum assured to the surviving spouse and pay the rest of the amount as monthly income over a period of time. Therefore, go through the various terms and conditions of different policies to buy the best term insurance plan.
2) In the unfortunate event of both husband and wife die at the same time in an accident or some other causes, the entire sum assured will be paid to the children, who automatically become nominees in this case. The policy will cease to exist after this.
3) Finally, if both husband and wife survive the term of the plan, they will not get any maturity benefits and the policy will be terminated. The life insurance companies will not be liable to pay them any money.
Based on the above-mentioned information, the benefits of buying a joint life term policy are:

1) You can save on premium. Compared to individual term plans, a joint plan is more economical.
2) Managing the policy and keeping a track record is easier compared to various separate individual policies.
3) A few policies do consider the average age of the policyholder at the time of calculating premium that can work in your favor. However, for the final terms, refer to the policy documents.

4) There are certain below mentioned disadvantages as well:
5) If both the spouses pass away together, the nominee (kids) will receive the sum assured on the policy, but if both had separate individual plans, that might have resulted in double the payout regarding sum assured.
6) When there is a single payout policy, the survivor’s policy cover lapses and buying a new policy might prove to be costly and cumbersome.
7) In the case of a divorce, it is not possible to delete one of the insured and carry on with the plan. The only option is to continue with the policy or discontinue it totally letting go of all the premium paid earlier. It is in your best interest to study the terms and conditions of various plans in great detail before finalizing your decision. The best term insurance plan will be the one that provides the couple adequate cover even after the death of one of the spouses and that too at a minimal cost. Make your decision wisely!