1. Should you buy joint term insurance with your spouse or stick to separate ones?

Should you buy joint term insurance with your spouse or stick to separate ones?

Term insurance is a form of life insurance plan that provides coverage over a period of time and if the insurer dies during that period, the death benefit is payable to the nominee.

By: | Published: November 14, 2016 2:27 PM
This plan promises a relatively higher sum assured at a low premium in case of any eventuality. (Reuters) This plan promises a relatively higher sum assured at a low premium in case of any eventuality. (Reuters)

Term insurance is a form of life insurance plan that provides coverage over a period of time and if the insurer dies during that period, the death benefit is payable to the nominee. This plan promises a relatively higher sum assured at a low premium in case of any eventuality. The investment premium is low in case of term insurances because there are no investment components and the entire premium goes in covering mortality charges. If all goes well and the insurer remains alive during the tenure, there is no return.

However, term insurance has become quite popular among professionals who want to secure a higher sum assured for their loved ones.

Features of term insurance

Term insurance is considered economic, as it is the cheapest option available in the market. Assuming you’re a 25-year-old salaried male earning Rs. 500,000 annually, you can avail a term plan 20 times your annual income, i.e. Rs. 1 crore, and your premium would be in the range of Rs. 7000.

Term insurance, being a pure insurance product, has no survival benefits. Your dependents gets the sum in your death as a one-time lump sum payment, along with the value of added benefits and riders such as monthly income.

They offer flexibility in terms of duration and you can buy term insurance for 5-30 years or even more. Riders such as disability and loss of income can also be availed along with term insurances. Check with individual insurance companies for such riders.

Joint term insurance – a tool for working couple

Joint term insurances usually pay out on first claims basis i.e., the sum assured is disbursed when first of the two insured passes away and the policy comes to an end. However, certain policies ensure payment in case of each of the two insurer’s death. In case of death of both partners, the sum assured is passed on to the children. The premiums and benefits received from these policies are eligible for tax benefits under Section 80C and 10(10D).

Pros and cons of joint term insurance

A joint term insurance covers both spouse on the same terms and conditions and it’s easier to keep track with one plan. On the other hand, with separate policies, partners have the liberty to choose conditions and costs to suit their personal requirements.

Also, with most joint policies offering one-death pay-out, in case of an accident causing two deaths, beneficiaries typically get one death-related payment. With separate term insurances you can ensure two separate pay-outs.
In case of divorce or separation between couples, a joint policy gets converted into a single policy. If one partner doesn’t pay in time or refuses to pay, the policy lapses unless the other takes the burden of paying premiums on her/his own.

Things to keep in mind

Compare the annual premium charges in both joint and separate insurance plans. Usually joint plans are cheaper than separate plans, so if you are on a tight budget, going for a joint plan would be economic. You can go online to compare the various term insurance products available.

Joint insurances are relatively new in the market so make sure you run your research and compare products of different companies before you pick your plan.

Also, evaluate the benefits of a joint cover and separate cover on a case-to-case basis. Before picking a plan, try and figure out if there are optional riders and clauses that could help you split a joint policy if required.

A joint term plan may work for professionals pressed for time and ones who are comfortable with a combined financial planning. While it saves you premium costs, it increases dependencies and provides you with lesser additional benefits and flexibility of an individual cover.

The author is CEO, BankBazaar

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