Term insurance is the simplest life insurance product available out there which offers pure risk protection. The concept of these plans is very simple. You are offered protection for a fixed period of time for a specific amount of sum assured. If you happen to pass away before the policy period is over, your nominee gets the sum assured as death benefit. If you survive the policy term, there is no payout. Premiums for these plans are usually very affordable, especially because there is no investment component, and no survival benefit either.
When it comes to insurance coverage, trends have been changing over the past few years. As of today, a large number of women formally employed and contribute towards household expenses. As a result, there is a rise in the number of double income nuclear families, where both earning members require adequate life insurance protection. To address this changing trend, insurers are beginning to introduce a new type of term insurance policy which covers both partners/earning members under a single policy. Known as joint term insurance policies, these term plans are fast gaining popularity and are being offered by many leading insurers. Let’s take a closer look at these plans.
Features/Benefits of Joint Term Insurance Plans
● Easy to manage – Managing various insurance policies can be a tricky task, especially when it comes to paying premiums. You may have a medical insurance policy, and multiple life insurance policies, for which you have to remember making premium payments on time. However, if you and your spouse are covered under a joint term insurance policy, it can greatly reduce the hassle of managing the premium payment for an additional term insurance plan.
● Multiple claim payout options – Different joint term insurance policies offer varying payout options to policyholders, based on their need. Under certain policies, the payout is made on the basis of the first claim, i.e. when one of the joint policyholder’s pass away before the end of the policy term, the sum assured benefit is paid out to the surviving policyholder. There are also policies which will make a payout on the death of each of the two insured policyholders.
● Money-saving option – As compared to the cost of purchasing two individual term insurance plans for two separate individuals, a joint term insurance plan is definitely much more cost effective than two separate plans.
● Tax benefits – Similar to all other types of life insurance plans, policyholders can avail attractive tax benefits on premiums they pay towards a joint term life insurance plan as well. Not only can they avail tax benefits for the premiums they pay towards the policy, but also towards the benefits which are received under the policy under Section 80D and Section 10 (10D) of the Income Tax Act, 1961.
● Additional benefits – Some joint term insurance plans also offer a number of additional benefits, especially in terms of the payout. Certain joint term plans will provide the surviving spouse with a regular income for a fixed period, especially in cases where one of the policyholder’s have passed away following an accident. Some joint life term plans offer an additional amount of benefit, if one of the insured has passed away following an accident.
● Option of riders – Similar to a car insurance policy, one can also opt for an add-on rider such as a critical illness rider, to enhance the protection provided by the base joint term life plan.
Joint Term Insurance Plans - How They Work
The working of a joint term life insurance policy is the same as that of a term plan. Under both these plans, a payout is made if the policyholder passes away before the expiry of the policy term. If they survive, there is no benefit payable. The only difference between these two plans, is, that under a joint term plan, both policyholders are covered under a single plan. The premiums payment is similar to a regular term plan, and can be made as per the options provided by the insurer.
Death Benefit Payout Under Joint Term Insurance
Under a regular term plan, the benefit payout is made only once, on the death of the policyholder. However, this may not necessarily be the case for a joint term life plan which covers two individuals. Based on the plan, and payout option chosen, policyholders can opt for any of the following:
● On the death of any one policyholder, the policy will pay the sum assured death benefit to the surviving policyholder. After the payout, the policy will cease to exist or provide cover.
● If one of the policyholders passes away, the sum assured benefit amount is paid to the surviving policyholder. However, the policy will continue to provide cover until the policy term is over, or the policyholder passes away, whichever happens sooner.
● As mentioned before, certain policies come with the option of providing the surviving policyholder with not just the sum assured, but also a fixed amount of income on a regular basis, for a specific duration.
Some points to remember
● Sum assured – The sum assured for a joint term life insurance plan will be determined after taking into account the annual income of both policyholders.
● Death of one policyholder – If one policyholder passes away, the payout will be made based on the payout option or plan that has been chosen.
● Death of both policyholders – In case both policyholders happen to perish at the same time, the benefit sum assured is given to the legal heir who has been nominated by the deceased policyholders.
● In case of divorce – If both the policyholders decide to split, the insurer will decide whether or not the policy can be split, or must be terminated.
Joint Term Plans - Who are they ideal for
The most ideal candidates for a joint term plan would be partners who are around the same age, mid-aged couples who are looking to save on life insurance premiums, and also those couples who may have similar lifestyle habits such as non-smoking, teetotalers, etc.
Joint term life insurance plans are now offered by many leading insurance providers, at very competitive rates, and terms, like health and motor insurance plans. If you are looking to buy one with your partner, you can always head over to a third party website which will let you compare different plans, so you can make an informed decision. Happy hunting!
(This post has been contributed by Bankbazaar.com)
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