Owing to affordability and coverage provided by the term plan, it has acquired massive popularity among those who look towards securing the financial future of their dependents. Unlike pure life insurance plan, though life insurance term plan does not come with any survival/maturity benefit, the plan is considered a highly economical option in the market. It is because the plan provides higher sum assured at lower premiums to the insured’s dependents. For instance, in case of a salaried individual aged 26 years earning a monthly income of Rs 40,000 has the chances to avail a term insurance, which is 10 times of his yearly earnings i.e. around Rs 50 lakh for 34 years tenure in event of his unfortunate demise during the insurance tenure. Note that, here the insurance premium of the life insurance plan would be up to Rs 6,500.
Before deep diving into joint term insurance and separate term plans – importance, let us first understand term insurance meaning. In a term plan, the beneficiary of the plan gets lumpsum amount also called assured sum in the event of the insured’s unfortunate demise along with the rider benefits or value-added benefits.
What is a joint term plan?
Joint term plan is relatively a new concept developed after a greater number of women began joining corporate workspace. Now as many women are even contributing towards the family’s income, it is crucial for both the working partners to be insured. It is through joint term insurance that both the working partners can be covered under the same insurance policy. In case of sudden death of any of the partners owing to any of the causes mentioned in the insurance document, the other partner is entitled to the assured sum as death benefit. In case both the partners expire at the same time, their kids get the death benefit i.e. the sum assured. Note that premium paid toward the insurance is eligible for tax deduction as per Section 80 C.
Important options for claim pay out provided by the joint insurance include:
- In case of the demise of either partner, the partner who is surviving is given the lump sum assured sum and the insurance ends thereafter.
- In case of the demise of a partner, the other partner receives the sum assured portion of the dead partner while the insurance covers the surviving holder till the term ends or until his/her demise.
- On death of a partner, the assured amount is handed over to the other partner either in form of lump sum payment or regular income for a fixed period (up to 5 years in a few cases).
Benefits of joint insurance
Savings on premiums: While term insurance is an affordable plan, the premium paid for two separate policies is much higher than that paid towards a joint term insurance in most cases. Thus, they are a prudent option for married couples looking to avail a cost and time saving insurance option.
Different payout options: Joint term insurance as listed above provide different payout options, which couples can choose as per their requirement and preference.
Tax benefits: Premium paid towards joint life insurance and the benefits availed on it is covered under IT act, 1961 provision.
Riders option availability: Like single term plans, joint term plans also come with rider options that enhance the coverage. Note the rider’s premium is charged over and above the base insurance plan.
Simple and easy to maintain: In a joint plan both the working partners do not require paying the insurance premium separately, and either of them can do it owing to the accessibility of account by both. As any of the partners can pay the premium through the joint account, it becomes easy to maintain or keep track of in situations if any one of the partners forget to make the premium payment.
Single term insurance vs. joint term insurance – which is better?
Single term insurance
- It is recommended for young earners as the premium available to them is lower than older individuals due to their younger age.
- Suitable for partners with considerable age gap as premium payment amount would be tough to evaluate as per age and sum assured in joint policy.
- Recommended if one of the partners is a smoker because the premium and sum assured both would vary in such cases.
Joint term plan
- Prudent for middle aged partners as the premium amount for 2 separate insurance may get expensive.
- Perfect fit for partners with no significant age gap.
- Suitable for partners with the same lifestyle. It is because if one of the partners is a smoker, it may result in higher premium payments.
Final thoughts
To make the decision between separate term plan and joint term plan, one should understand their requirements and the requirements of their dependents. Both the options come with their own set of advantages and disadvantages that one should factor in before making the final decision. Comparing the yearly premium of separate and joint term insurance is one way of determining the final plan. For this, you can take the help of term plan premium calculator as it provides an accurate calculation of the premium outgo on a monthly and yearly basis.