Several life insurance firms have lately introduced joint life insurance policies for couples. Buying one policy instead of two is cheaper and can be estimated with a term insurance premium calculator. In joint life insurance, both partners are owners and beneficiaries. One person receives the life cover benefit if the other ceases to exist.
Joint life insurance policies have become popular recently, but are they right for all couples? Are the extra advantages worth it?
Types of Joint Life Insurance for Couples
Two lives, as opposed to one, are protected by a Joint Life Insurance policy, which may be an endowment policy or a simple term plan.
Joint Term Plan: Both parties pay a single premium for a specified period. If one partner passes away, the surviving partner can claim the life cover sum, and the cover ends. Some policies of this form of joint life insurance have a maximum amount of coverage that can be claimed. Find the right amount to invest with a term insurance premium calculator.
Joint Endowment Plan: There is an investment component to an endowment policy. Like a term plan, its duration is generally until the policyholder retires. The insurance company then pays the policyholder a certain sum, known as the ‘endowment’.
After the policy expires, this combined life insurance pays the couple an assured sum. If one partner passes away, the other obtains the cover and the endowment money at the end of the predetermined period. Joint life insurance premiums stop after anybody passes away first.
Reasons for Joint Life Insurance
The term insurance tax benefit makes joint life insurance cost-effective for couples. The surviving spouse receives the total assured sum on the primary policyholder’s cover and does not have to pay future payments for this joint life insurance.
For example, a 36-year-old husband and 35-year-old wife choose INR 50 lakh and INR 25 lakh joint life insurance plans. The wife receives INR 50 lakhs if the husband passes away. Her INR 25 lakh life insurance will continue without premiums.
In some joint life insurance contracts, the recipient can choose a lump amount or monthly payments for up to 10 years if one partner passes away. It can be calculated through a term insurance premium calculator. If the primary policyholder passes away, the companion keeps the insurance, and all future premiums are waived. The primary policyholder’s premiums remain unchanged if the spouse is no more. Depending on the sum insured, several online insurers demand health check-ups.
Nominee: The ‘regular income’ provision helps a child who is the nominee on a combined life insurance plan if their parents meet with an unfortunate event. The youngster receives a lump payment or monthly money to fund education or other needs.
A couple should evaluate their life before choosing joint life insurance coverage and availing of term insurance tax benefits.
Joint plans are easier to maintain and track for couples with a shared home loan who want life insurance to protect their heirs from housing loan liabilities.
When does it make no sense to purchase a joint life insurance policy?
In the opinion of financial advisers, the primary purpose of mutual life insurance is to replace the insured’s income for the benefit of their dependents. Hence homemaker coverage is unnecessary.
If the surviving spouse works well and oversees all home finances, paying a higher annual premium just for the premium waiver benefit makes little sense.
The savings are negligible. The annual price for joint life insurance policies is just 700 to 1,000 rupees (INR) less than that of standard life insurance policies (approximately).
Additionally, premiums vary based on a person’s health, habits, and lifestyle. A tiny difference eliminates flexibility, and a couple is trapped in the policy for a minimum of fifteen to twenty years.
If one cancels the policy, the other must pay the same premium.
An unsettling yet practical consideration is the likelihood of a divorce, in which case the split couple’s insurance requirements become distinct. Therefore, the couple will be required to give up their joint term life insurance policy or let it lapse before purchasing a new policy with a higher premium due to the passage of time. If it is an endowment policy, early liquidation will be required, resulting in poorer returns and the loss of the embedded life insurance.
*Standard T&C Apply
Typically, financial advisors divide their clients’ term life insurance needs into distinct life stages, then acquire three to four policies with differing durations at various ages during their customers’ lifespans. This provides the required flexibility and is less expensive than purchasing a single, large-coverage, joint life insurance policy.
After evaluating communal life covers’ unique utility and convenience, it may be prudent to divide your insurance needs between a traditional term plan and a joint life insurance policy.