Term insurance plans are necessary additions to any portfolio these days, offering pure life coverage for policyholders throughout the policy tenure. In addition, these plans are comparatively affordable options for ensuring the financial security of your family/dependents in your absence. While these policies come with several benefits, couples should be careful with regard to choosing between individual policies or joint-term insurance plans. Here is a brief guide to the same.
Knowing More About Joint-Term Insurance Policies
Joint-term insurance covers both spouses under one policy. These policies pay the sum assured upon the demise of either one of the two insured individuals. In a few cases, the surviving partner can also get regular income under the policy’s terms and conditions. Both spouses will pay the premium for a particular duration, just like an individual term insurance plan. They will also have joint life coverage.
Knowing More About Individual Term Insurance Policies
Individual term insurance policies function similarly. The only difference is that there is one policyholder, and the sum assured is paid to the policyholder’s family members and dependents upon their demise within the policy period. Term insurance plans have grown in popularity among consumers who wish to ensure a financially secure future for their loved ones because of their affordability and coverage.
Term plans do not provide any survival or maturity benefits, but they are the most cost-effective alternative on the market. Assume you are a 26-year-old salaried individual earning Rs 5,00,000 per year. You can buy a term plan that guarantees to provide 20 times your yearly income, i.e. Rs. 1 crore, in the event of your untimely death, with a premium as low as Rs. 7000. Please note that this is an illustration and the actual premiums may differ as per your age, medical history, coverage amount and policy tenure.
Joint Or Individual Term Insurance- Which One To Choose?
Couples should compare individual and joint-term insurance plans carefully before taking a final decision. Experts feel that joint policies are more cost-effective over the long haul. In case of the demise of one spouse, the other receives the entire sum assured amount. The policy also stays active, while the surviving spouse is exempted from the payment of future premiums. Couples should always keep these aspects in mind while deciding.
Here is a comparison that you should keep in mind:
| Parameter | Joint Term Insurance | Individual Term Insurance |
| Coverage | Both spouses are covered under one policy | Both spouses have their individual policies |
| Sum Assured Framework | The sum assured is based on the combined income of both spouses | The sum assured is based on the person’s individual income |
| Payouts | The payout is made to the spouse who survives and the continuation of the policy is subject to the terms and conditions | The sum assured is paid to the nominee and the policy terminates accordingly. The surviving spouse has coverage under his/her individual plan |
| Nominee Payouts | The nominee gets the sum assured if both spouses pass away | The sum assured amount in each policy is paid to the respective nominee |
| Waiver of Premium | The surviving spouse does not have to pay premiums after the demise of one spouse | This is not applicable, as the coverage ends if the insured spouse meets an untimely demise |
| Homemaker Spouse Coverage | This can be availed with a lower sum assured amount | These are not available for non-earning individuals |
Some Other Vital Aspects Worth Noting
While investing in term insurance, the coverage amount should be calculated carefully. The HLV (human life value) is often the framework for calculation, which is sometimes 15-20 times the annual income of the policyholders. The joint-term insurance plan helps couples where one parent becomes a stay-at-home guardian until the child grows up and starts attending school. The sum assured is payable upon the demise of either spouse. Conventional policies do not always have provisions for offering life coverage to non-working individuals. These joint insurance plans come with more widespread benefits and are often more cost-effective than separately paying premiums for individual policies.
Single coverage policies cover only the policyholder without any coverage for the other spouse, who may be a homemaker bringing up the children. The joint policy framework also helps spouses avoid scenarios where they have to choose individual life coverage later in life, which can be costly. Joint-term insurance coverage, while being cheaper, may also ensure additional tax savings in some cases.
Younger couples can save more money on their premium payments while getting sizable coverage in turn. The critical aspect, in this case, is the fact that a sum assured is paid out upon the death of either of the spouses, which offers a higher chance of financial security and inclusion for the family and dependents. Hence, consult your financial advisor before checking out the features and benefits of joint-term insurance policies. According to experts, these may be better options for couples in several cases.