Joint Term Insurance Plan
As more and more women join the workforce and become financially independent, a joint term insurance plan has been introduced by several insurers of the country.
A term insurance plan is the simplest and basic form of life insurance that offers coverage, purely for the risk of life. If the life insured in a term insurance plan dies within the policy term, the predetermined sum assured is paid to the beneficiary as a death benefit.
What is a Joint Term Insurance Plan?
A joint term insurance plan offers coverage to a couple through a single plan. If either of the spouses dies, the sum assured is paid to the surviving spouse by the insurer.
Features of Joint Term Insurance Plan
The entire process can be accomplished in a few defined steps by invoking the “Buy Online” or “Buy Now” Tab in the portal. The involved steps are:
- The Joint Term Plan offer multiple payout options:
1: In the first option, the claim payout is made to the first claim on the death of one of the policyholders. In this case, the entire sum assured is paid to the surviving spouse.
2: In the other option, the payout can be done in a way to receive a portion of the sum assured on the unfortunate death of each policyholder
- When compared with individual term plans, Joint Term plans are economical and budget-friendly when compared to the premium cost of two individual Term Insurance Plans.
- The tax benefit is applicable for premiums paid by policyholders as per the Indian Income Tax Act, 1961. The sum assured received as the death benefit is eligible for tax benefit under the Indian Income Tax Act.
- Since it is a single policy that offers cover for both the partners, it is simpler and more convenient to keep track of the premium payment of the Joint Life Term Insurance policy.
- Some insurers offer additional benefits in the form of built riders. This additional coverage may include critical illness benefit (one of the policyholders gets diagnosed with a critical illness), accidental death benefit (one of the policyholders dies as a result of an accident).
How does a Joint Term Insurance Plan work?
- The working of a joint term insurance plan is like that of an individual term plan.
- In this case, a single plan offers life cover for two people and not one.
- The policy has a single premium even though the coverage is for 2 people.
- The coverage offered under a joint term insurance plan remains fixed.
- The premium payment term is generally the same as the policy term.
- If any of the policyholders die during the policy term, the surviving partner can claim for the benefit of sum assured.
Claim Payout Options in a Joint Term Insurance Plan
The payout options available under a joint term plan can be any among the following. On the death of any one of the policyholders, the sum assured is paid to the surviving partner as per the selected payout option.
- The complete sum assured is paid as a lump-sum payment, and the policy ceases to exist from then.
- The sum assured is paid to the surviving member, following which the policy continues either with the waiver of subsequent premium payments or without any waiver. The policy terminates on the occurrence of any one of the following events happening before the policy term or the death of the surviving insured member.
- In some cases, the surviving insured member gets the sum assured accompanied by regular payouts that are given for a certain period.
Comparison between a Joint Life Term Insurance Plan and an Individual Term Plan
The main differences between a joint life term insurance plan and an individual term plan are:
||Joint Life Term Insurance Plan
||Individual Term Insurance Plan
||Covers both partners in a single plan
||Both partners take separate individual term plans
||The combined sum assured in a joint-term plan depends on the policyholders' annual income since both partners are offered coverage on the same parameters.
The policyholder's income is taken into consideration while deciding the sum
|Death of one insured partner
The payout to the surviving member is done based on the plan selected.
The policy continuity also depends on the plan type selected by the policyholders.
On the death of the policyholder, the policy terminates, and the entire sum assured is paid to the nominee.
The other surviving partner remains insured as the coverage is through a separate policy.
|Death of both insured partners
||In the case of the death of both the policyholders, the sum assured is paid to the legal heir mentioned in the joint-life term insurance plan.
||In an individual term insurance policy, both partners have separate insurance policies. In case of the death of both the partners, the sum assured is paid as per the nominee/ heir details mentioned in both the plans exclusively.
||In the event of a divorce, the insurer can confirm if there is an option to split the policy and let it continue.
||In the case of individual term plans, a divorce of the partners does not affect the working of the policy. If, however, the partners have named each other as their nominee, the nominee details would have to be changed.
Who should take a Joint Term Insurance Plan?
A joint life term insurance policy is suitable in the following cases:
- Partners who have a minor difference in their ages or are approximate of the same age must prefer a joint life term insurance policy.
- Couples who are middle-aged and wish to buy term plans at an economical premium rate are suitable for a joint life term insurance plan.
- Couples with a similar lifestyle – non-smokers, smokers, non-alcoholic, etc., are suitable for a joint life term insurance policy.
Ans: Term plans do not have any maturity benefit. The sum assured/ death benefit in a term plan is paid only in case of death of the life insured. If the life insured survives the term plan, no maturity benefit is paid.
Ans: Yes, it is always recommended to purchase an additional term plan to have extra coverage.
Ans: Yes, term plans offer coverage for deaths due to natural disasters or terrorist attacks.
Ans: Yes, a smoker can buy a term insurance plan. The only difference is the premium rates that are relatively higher than a non-smoker.
Ans: Yes, even if the person is an occasional smoker, it must be declared at the time of purchasing the policy.
Ans: Suicide by the policyholder (sane or insane) in the first year of the policy purchase is not covered under a Term Plan. In case of such an unfortunate event, the policy terminates, and the premium paid by the policyholder is returned after deducting the applicable taxes and policy changes.
Ans: No, a policyholder cannot avail loan on a Term Insurance policy since a Term Plan does not offer any maturity benefits.
Ans: Premium paying term refers to the tenure or period up to which the policyholder has to make premium payments to the insurer.