Joint Life Term Plan

In today’s world almost all couples are working and earning in order to provide financial aid to the upbringing of a family and to share financial responsibilities like children education, loans, taxes, etc. However, in the event of death or disability of any one of the partners can have a huge impact on the financial situation and well-being of the family. Similarly, if one of the partners is financially dependent, still he/she has a financial value which makes it imperative to buy an insurance cover, as in the event untimely demise the surviving partner has to hire external help to manage household chores and while if the bread-earning partner dies the entire family would come to a financial standstill. So, to overcome such situations it is important to avail a joint life term insurance plan because if one dies the other partner is entitled to receive the death benefit. Thus, a joint life term insurance plan will help secure the life of another partner if one of them is no more.

What is a Joint Life Term Insurance?

A joint life term insurance plan as the name suggests is a term insurance plan designed to cover two individuals under a single insurance policy. This policy is ideal for a couple who are looking for insurance coverage at an affordable premium amount. A joint life term insurance plan can be opted by a couple wherein the insurance coverage can be extended to the spouse. Much like a single term insurance plan, a joint life term insurance plan also does not come with a maturity benefit. The sum assured is paid to the surviving partner upon the death of the spouse or it is paid to the legal heir in the event of the death of the couple. Although a joint life term insurance plan is popular amongst couples, or couples with children it is not restricted to married couples as it can be availed by business partners who are not related to each other. 

Key Features of Joint Life Term Insurance Plan 

Key features of a joint life term insurance plan are as under:

• The surviving partner has an option to choose the manner to avail the death benefit either in a lump sum or in instalments
• If at the time of policy purchase the primary insured did not add a partner then he/she has the option to add the partner at a later date.
• Many insurance providers offer flexibility to choose the policy tenure as per the financial needs of the couple
• Couples also have the flexibility to choose the premium payment frequency as per their financial convenience.

Benefits of Joint Life Term Insurance

A joint life term insurance plan offers numerous benefits to the insured as under:

1. Joint Insurance Cover
   The biggest benefit of a joint life term insurance plan is that both the partners are covered under a single insurance policy. It saves time and energy for availing two separate term insurance plans and is a great tool if one of the partners is financially dependent. 
    
2. Payout Option
   Joint Life term insurance plans offer flexibility to choose the payout option as per the financial needs of the family. 
    
3. Policy Servicing
   Maintaining the joint-life term insurance plan is simple and easy. The couple has to pay one premium to cover two individuals. Similarly, remembering the premium payment due date becomes easy.
    
4. Affordable
   With a joint life term insurance plan you can cover two lives at a lower cost. Under this insurance plan, insurance cover is offered to two people under a single plan thereby couple get higher insurance coverage at a lower cost.
    
5. Tax Benefit
   Tax benefit is available to insured for the premium paid towards a joint life term insurance plan under section 80C of the income tax act,1961. A tax benefit up to INR 1.5 Lakhs per year is allowed. Additionally, the death benefit received is also exempted from the tax ambit under section 10 (10D) of the Income Tax Act provided the sum assured is at least 10 times the annualised premium.

Thus, above the key benefits of a joint life term insurance plan.

What is Covered?

A Joint Life Term Insurance plan is designed to cover deaths caused due to:

• Natural Death
• Death due to pre-existing disease (that has been disclosed by the insured at the time of policy purchase)
• Death due to Critical Illness
• Death due to accident

What is not Covered? 

Insurance providers usually do not cover the items specifically listed in their exclusions. The exclusions involve death due to:

• Death due to self- inflicted injury
• Death due to HIV/AIDS
• Death due to Intoxication
• Death due to Homicide
• Death due to Natural Disasters

How does Joint Life Term Insurance Plan Work?

As the name suggests, a joint life term insurance plan is designed to cover two lives under one single policy i.e. a joint life term insurance plan offers insurance coverage to both the partners under one single insurance policy. Since it is a single policy both the partners pay a combined premium for the insurance cover. The working of a joint life term insurance plan is as under:

1. The policy covers two lives under one single policy
2. A combined premium is charged for the sum assured availed under the policy
3. The policy tenure is determined at the time of purchase of the policy
4. The premium is paid throughout the policy tenure
5. In the event of the death of anyone partner during the policy tenure, the surviving partner receives the sum assured, and usually, the policy terminates. However, in the event of the death of both the partners at the same time, the death benefit is paid to the legal heir
6. Some insurance companies offer a single lump-sum death benefit in the event of the death of one partner and the policy terminates. While some offer to continue the cover at reduced premium or waiver of premium until the death of the surviving partner and then the policy terminates. While some companies also offer to pay a certain percentage of sum assured as death benefit at the event of the death of the first partner and then continue giving monthly payouts to the surviving partner for a fixed number of years.

Working of a Joint Term Life Insurance Plan

Let us see how a Joint Life Term Insurance Plan works with an example:

Sarang and Gargi, a married couple purchased a joint term insurance plan of a sum assured of INR 1 Crore for policy tenure of 30 years. If Sarang dies in 5th policy year, the surviving partner will either receive a lump sum benefit and the policy will terminate or they may opt for a monthly payout structure for a particular time, let’s assume the monthly payout is 1.75% of Sum Assured, so in this indicative example, the monthly payout will be INR 1.75 Lakh for next 5 years = INR 2.05 Crore thereby making the joint-life term insurance plan more rewarding. However, if both the partner had died at the same time the payout would have remained same i.e. INR 1 crore to the legal heir. Thus, this is how a joint term insurance plan works. If both the partners had separate term insurance plans then the nominee would have received two different payouts. Similarly, in case of a divorce splitting up of joint life term insurance is not difficult, so, in such scenario buying a different term insurance plan is a better option.

1. Claim Process

The claim process of a joint term insurance plan is similar to most term insurance plans available across the insurance sector. The nominee or beneficiary has to submit the relevant required documents to the insurance company. Upon verification of the documents, the insurance company shall credit the death benefit amount to the nominee or beneficiary. The treatment of claim process under a joint life term insurance is as under:

• Some of the joint-life term policies offer a first claim basis, i.e. the entire death benefit is paid in the event of the death of whoever of the two partner dies first and the policy cover terminates.
• While some offer the death benefit in the event of the death of each partner.
• Some plan offer to provide additional benefit i.e. in the event of the death of one partner the policy provides for a regular income for the surviving partner for a pre-determined period with this benefit the surviving partner receives a regular income over and above the death benefit paid (as mentioned in above example)

2. Riders

Riders are add-ons that an insured can add to the basic policy to make it more robust. Some of the joint-life term insurance provides the rider options like:

• Critical Illness Rider: where a lump sum benefit is paid in the event of diagnosis of any listed critical illness.
• Accidental Death Benefit Rider: Some of the companies offer a built-in accidental death benefit rider that offers additional death benefit in the event of the death of the insured due to accident.
• Terminal Illness Rider: Some insurance companies offer a built-in terminal illness rider to cope with the expenses of rapidly progressing and incurable diseases. 

3. Tax Benefits 

All the premiums paid and payments received under a joint life term insurance plan are eligible for tax benefit under section 80C and Section 10(10D) of the income tax act 1961.

Who Should Opt for Joint Life Term Insurance? 

A joint term insurance plan is suitable for couples where both are earning and contributing to earnings and household expenses. As in the occurrence of an unforeseen event like the death or disability causing loss of income will severely hamper the lifestyle, therefore staying adequately covered is advised.

In the event where one of the people in a couple is bread-winner while spouse is dependent in such scenario in the event of the death of the breadwinner, the income of the family will be stopped so for them a joint life term insurance policy will provide financial security to take care of immediate financial needs and emergencies.

A joint life term insurance plan is also suitable for young couples with kids and has liabilities to fulfil as in the event of loss of income due to death or disability it would significantly hamper the livelihood of the dependents. Therefore, buying a joint life term insurance plan would ensure financial care and security.

Which is Best: Joint Term Plan Vs Two Separate Term Plans? 

To understand which type of plan is best let us first understand the key differences between both the plans. in the following table, we talk about the benefits, features, pros and cons of both the types of plans.

Thus, both types of policies have their benefits and advantages. So, the best type of insurance cover depends on the personal choice and financial needs of the individual.

Best Joint Life Term Insurance Plans in India (2020) 

Following are the best joint life term insurance plans for couples in India.