Joint Term Life Insurance

What Are Joint Term Insurance Plans?

You might come across a term plan with joint life option wherein two individuals can be covered under the same policy. Do you know what this joint term insurance is and how it works?

Joint term insurance plans are term plans which insure two individuals under the same policy.

If either of the life assured passes away, the plan pays a financial benefit to the other life assured. In some plans, the coverage might continue till the second life assured survives. If the second life assured also passes away, the death benefit is paid to the nominee and the plan is terminated. This will vary as per policy terms and conditions.

Are Joint Term Insurance Plans Only for Spouses?

Joint term insurance is meant to cover individuals on a joint basis who have an insurable interest in each other’s life. Since married couples have insurable interests in each other’s lives, the coverage is also issued to them. However, it can also be opted by a parent and their child.

Who Should Get Joint Term Insurance?

Married couples can get joint term insurance coverage so that both of them are insured under a single policy. This would be easy to manage and might also prove cost-effective. Joint life term plans can also be co-owned by a parent and their child, to protect the child financially in the event of the parent’s untimely death or vice versa.

How Does a Joint Term Insurance Plan Work?⁴

Under a joint term insurance plan, the individuals to be insured first make a proposal for coverage. One will be the primary life assured and the other will be the secondary life assured. They choose the sum assured, policy tenure, premium paying tenure and frequency of premium payment. For the sum assured, there might be two options –

• The joint lives are covered for the same sum assured. This means that both the primary and secondary lives are insured for the same sum assured.
• The primary life assured is covered for 100% of the sum assured and the secondary life assured is usually covered for 50% of the sum assured³. You can check with your insurer for more details. The premium of the policy is paid over the chosen premium payment tenure and as per the chosen frequency. The benefit payouts under the policy can be in the following manner –
• If any one of the lives covered under the plan passes away during the policy tenure, the applicable sum assured is paid. The plan is terminated and the surviving life assured does not get coverage for the chosen tenure.
• If any one of the lives covered under the plan passes away during the policy tenure, the applicable sum assured is paid. The plan continues till the chosen tenure or till the death of the surviving life assured, whichever is earlier. On the survivor’s death during the policy tenure, the death benefit is paid to the nominee.

In the second option, wherein the coverage continues after the death of any life assured, there are premium payment options too offered by joint life plans. Have a look –

• The surviving life assured pays the premium over the remaining tenure or till their demise, whichever is earlier.
• The surviving life assured pays a reduced premium over the remaining tenure or till their demise, whichever is earlier.
• The premium is waived but the coverage continues

Thereafter, if the plan matures and the surviving life is alive, the plan is terminated and no benefit is paid. However, if the return of premium option is selected, the premium is refunded back.

How Is Joint Term Insurance Plan Different from Another Insurance Plan?

Here are some ways how joint term insurance is different from other types of insurance plans –

Reasons to Consider Joint Term Insurance Plan:

Some of the reasons to consider a joint term insurance plan are as follows –

• If you want one policy for two individuals with insurable interest in each other’s lives, the plan can be a good choice
• Joint life term plans may be cost effective and easy to manage. While the savings on premium may not be less, still it might seem convenient to opt for a single plan rather than two.⁵
• If you want to save premium on two different policies for yourself and your spouse, you can choose a term plan with joint life option and save on the premium⁵
• If you want to service one policy but want coverage for two individuals, joint term insurance can be a good choice

What Are the Benefits of Joint Term Insurance?

Some of the benefits of joint term insurance plans are as follows -

● Cost-effectiveness

Compared to buying two independent policies for two individuals, the joint life plan can offer lower premiums. This helps you save on the premium outgo and enjoy cost-effective coverage.

● Tax benefits

Like other life insurance policies, joint life plans also offer tax benefits. The premiums paid, up to 10% of the capital sum assured1 assuming the policy is issued on or after 1st April 2012, are allowed as an income tax deduction u/s 80C up to a limit of Rs.1.5 lakhs. For policies issued prior to this date, premiums up to 20% of the capital sum assured will be allowed as an income tax deduction2. For policies issued on or after 1st April 2013, if the life insured suffers from a disease or disability defined under Section 80DDB or Section 80U, premiums up to 15% of the capital sum assured will be allowed as an income tax deduction1. The maximum deduction limit, however, is Rs.1.5 lakhs¹.This benefits are available only for persons opting for old regime of Income Tax.

Moreover, the death benefit received from the policy is also completely tax-free2. Maturity benefit received is also tax free subject to satisfaction of conditions mentioned under Section 10(10D) of the Income Tax Act 1961. If conditions under Section 10(10D) are not satisfied, gain from such policy on maturity will be taxable in the hands of recipient.

● Children's dreams

For couples having children, a joint life policy can help in fulfilling the children’s dreams. As the policy pays a benefit if either or both parents pass away (depending on the policy chosen), the benefit can provide the financial means for the child’s higher education, marriage and other financial needs.

● Family's lifestyle maintenance

If you choose a policy that pays the sum assured if either of the insured partners passes away, the surviving partner gets financial assistance in the other partner’s absence. This financial assistance allows the surviving partner to take care of the family’s lifestyle needs.

● Easy to service

Instead of two independent policies, a joint life policy is also easy to service. There is one premium payment date to remember which makes it easier to pay the premiums on time.

Process to Buy Joint Term Insurance Plan

You can buy a joint term insurance plan in either of the following two ways –

● Online

Many insurance companies offer an online mode of policy purchase. You have to fill out an online application form, pay the premium online and get covered.

● Offline

The offline mode includes buying the policy from the insurer’s branch office or through an intermediary. You will have to fill out a physical application form and pay the premium via cheque, demand draft, cash or other modes.

Conclusion

A joint term life plan is a good choice for any two individuals having insurable interest in each other’s life, as it insures two lives in a single policy and provides financial security. You have the flexibility to choose the sum assured, type of coverage needed, premium payment details, coverage duration, etc. to design a policy that matches your financial needs. So, understand what joint term plans are all about and buy them if they align with your financial planning.

FAQs

1. Is a Joint term insurance plan expensive?

The premium of a joint term insurance plan depends on a lot of factors like the insured individuals’ age, sum assured, tenure, past and present medical history, etc. It is a cost-effective way to insure a couple.

2. If both of the life assured die who gets the sum assured?

If both the life assured die, the sum assured is paid to the appointed nominee or the legal heirs if there’s no nominee.

3. Who should get a joint life policy?

A joint life insurance policy is usually suitable for a married couple.

Reference

1. https://incometaxindia.gov.in/tutorials/20.%20tax%20benefits%20due%20to%20health%20insurance.pdf

2. https://www.livemint.com/money/personal-finance/how-life-insurance-policies-are-taxed-11665145664260.html

3. https://www.zeebiz.com/personal-finance/news-when-is-a-joint-life-term-insurance-policy-that-covers-a-couple-is-useful-find-out-66427

4. https://www.forbes.com/advisor/in/life-insurance/joint-life-insurance/

5. https://www.business-standard.com/article/pf/joint-life-insurance-is-cost-effective-115080301243_1.html

information gathered from –

● https://economictimes.indiatimes.com/wealth/insure/should-couples-buy-joint-life-insurance/tomorrowmakersshow/48612653.cms

● https://www.forbes.com/advisor/life-insurance/joint-life-insurance/

● https://www.zeebiz.com/personal-finance/news-when-is-a-joint-life-term-insurance-policy-that-covers-a-couple-is-useful-find-out-66427

● https://www.beshak.org/insurance/health-insurance/articles/how-does-a-joint-life-term-insurance-policy-work/

● https://www.business-standard.com/article/pf/joint-life-insurance-is-cost-effective-115080301243_1.html

BJAZ-WEB-EC-06333/24