Traditionally in India, it has been the male member who opts for life insurance as the sole breadwinner for the family. However, with more women joining the workforce and more households depending on the income of both spouses, there is an increased need for providing joint life insurance coverage.
Given today’s rising living and healthcare costs and increase in critical illnesses, it’s crucial to have life insurance protection for both spouses in the household. According to IRDAI regulations, a non-earning member of the family cannot buy a term insurance . But there is an exception to the rule. The husband can buy term insurance for a housewife. In such a case, a joint life term insurance policy makes even more sense.
What is a joint life term insurance policy?
As it plainly suggests, a joint life term insurance plan provides life insurance coverage to both husband and wife under a single policy. A joint life term insurance plan comes with various features and benefits depending upon the insurer. Most joint term life insurance policies are single death payout policies; meaning the policy stops after the death benefit is paid upon death of one of the spouses. But there are policies that pay death benefits for both spouses, as well as regular income to the surviving spouse.
Some joint life insurance policies also allow riders for critical illnesses, permanent disability, dismemberment and accidental death. Whatever the variations and conditions of the policy, a joint life term insurance policy has a host of features and benefits that are really advantageous to the couple and their children or dependents.
Benefits of joint life term insurance
In most cases, joint life term insurance will cost you comparatively less than buying two separate term insurance policies. It is also easy to keep track of the plan when both the husband and wife are covered under a single policy. Another advantage of joint life term insurance policy is the waiver of premium feature. In case your joint life term insurance plan comes with double pay out, in case of death of one spouse the other gets lump sum payment of death benefit and waiver of premium with continued life coverage for the surviving spouse. Finally, premiums paid on joint life term insurance policy are eligible for tax deductions under section 80C and the death benefit received is exempt from tax under section 10 (10D) of the Income Tax Act.
When should you buy joint life term insurance?
Joint term insurance is ideal for nuclear families where both spouses work and they have home loans and personal loans to pay. It also protects the family against death and disability of any earning member of the family and lightens the financial burden. Young couples with kids and outstanding loans should also opt for a joint life term insurance policy to secure their children against any future mishaps.
Things to keep in mind before buying a joint term insurance plan
- Joint life term insurance plans mostly provides single death benefit and the policy ends after that. The surviving spouse will have to buy a new term life insurance policy to get life coverage after the death benefit for the joint policy is paid out.
- One of the drawbacks of a joint term insurance policy is that it can get tricky if the couple decide to separate. One of the partners will have to take the burden to continue paying premiums or the policy will lapse.
- In a joint life term insurance plan, the sum assured is determined by assessing the age, lifestyle, health condition and income of the primary policyholder. The insurer only looks at the age and medical condition of the secondary policyholder. Even if the secondary policyholder is working, the sum assured will depend only on the profile of the primary policyholder.
Keep the above things in mind before buying a joint life term insurance policy to take maximum advantage in terms of cost and sum assured. But also remember things such as single pay out and the issues with divorce/ separation.