Two Individual Policies or a Joint Policy: How to Make a Decision
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Making a smart financial decision often involves comparing two choices. Like what asset to invest your annual bonus in - an FD or the stock market? Or how to finance your upcoming vacation - with a personal loan or with your savings?
These choices often increase manifold when you throw another person into the mix - like when you and your spouse decide to make your investments and financial decisions jointly. In that case you need to factor in the goals, financial needs and expenses of two people. On the upside, it may mean that you have two incomes to start with, so your budget could be considerably higher.
And if you and your spouse are both earning members of your family, it's likely that your incomes each take care of different aspects of your finances. Perhaps your income is for investing, while your spouse's earnings cover your family's everyday expenses.
In a household like this, should anything untoward happen to one of the breadwinners of the family, it could lead to a strain on the finances. This is why a life insurance cover is an essential financial product to have in every family's investment portfolio.
In case there are two earning members in a family, it becomes necessary to insure both the breadwinners. In some situations, people may wish to insure their spouse even if they are not earning members in the family.
But then again, there's a choice to be made here. Should you get two separate policies for you and your spouse, or should you buy a joint policy? Let's take a closer look at what a joint life cover is, and how you can resolve this dilemma.
What is a joint life insurance policy?
A joint life insurance policy offers coverage to you and your spouse under the same plan. Under this kind of policy, the two insured lives are called the 'primary life insured' and the 'secondary life insured.'
Generally, the sum assured for the secondary life is set at a percentage of the sum assured for the primary life. For example, in the case of the ABSLI DigiShield Plan, the sum assured for the secondary life is 50% of the sum assured for the primary life. So, if you apply as the primary policyholder and choose a sum assured of Rs. 50 lakhs, your spouse will be covered for an amount of Rs. 25 lakhs.
Aside from this key difference, a joint life insurance policy works much like a regular insurance plan. The coverage is offered for a predetermined tenure, there are premium payments to be made, and there are tax benefits too.
How does the payout in a joint life insurance policy work?
Typically, a joint life insurance plan offers multiple payout options, depending on the demise of the primary and/or the secondary life insured. Here is a closer look at how the payouts work in different situations.
- If the primary life insured passes away before the secondary life insured
Here, the sum assured for the primary life insured will be paid to the secondary life insured. And the cover for the secondary life insured will continue at reduced premiums, as per the terms of the policy.
- If the secondary life insured passes away before the primary life insured
In this case, the sum assured for the secondary life insured will be paid to the primary life insured. And the cover for the primary life insured will continue at reduced premiums, as per the terms of the policy.
- If both the primary and the secondary life insured pass away simultaneously
The sum assured for the primary and the secondary life insured will be paid to the nominees, and the policy is terminated.
What are the advantages of a joint life policy?
A joint life insurance policy offers some distinct advantages. Here are the key benefits of getting a joint life cover.
- You can save money on insurance premiums.
- You and your spouse can both enjoy tax benefits.
- It ensures that you and your spouse are both covered by life insurance.
When to choose a joint life policy?
Now that you know how a joint life insurance plan works, you probably already have a good idea about whether or not it's a good idea to choose this kind of a policy. In case you're still on the fence about it, here are some situations in which a joint life policy makes sense for your financial situation.
- If there is not much of a difference in your age and your spouse's
- If you wish to save on insurance premiums
- If you and your partner have similar lifestyles (both smokers or non-smokers, etc.)
When to choose two separate life insurance policies?
On the other hand, there are also situations where it may be ideal to get two separate life insurance policies instead. Here are some such scenarios.
- If your insurance needs vary vastly from your spouse's
- If your insurance budget allows you to accommodate the premiums for two separate covers
- If you wish to enhance your policy with add-on riders
This should help you make the choice between a single joint policy and two separate life insurance policies more easily. In case you opt for the latter, you can always get a joint cover later on, if the need arises. Alternatively, if you get a joint cover today, you can always get two individual policies later on. After all, there is no limit on the number of insurance policies you can have.
ABSLI DigiShield Plan (UIN 109N108V06) is a non-linked non-participating individual pure risk premium life insurance plan; upon Policyholder's selection of Plan Option 9 (Level Cover with Survival Benefit) and Plan Option 10 (Return of Premium [ROP]) this product shall be a non-linked non-participating individual life savings insurance plan.
ABSLI Life Shield Plan
A term insurance plan that offers you the flexibility of plan options suitable for your family's non- negotiable goals and ensure they need not compromise on their lifestyle. UIN: 109N109V05
- Choice of 8 plan options
- Cover your spouse under the same policy
- Longer Life cover till age 85
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