A Joint Term Insurance Plan or Two Separate Term Plans – Which Option is Better?

When it comes to securing the future of your loved ones, a term insurance plan emerges as a simple yet impactful solution. Its purpose is straightforward - to provide financial protection in the unfortunate event of you passing away during the policy term. The insurance company will offer a fixed amount of money to your family in such a situation. This sum of money provided by the insurance company acts as a substitute for your income, ensuring that your family can realise their dreams no matter what life brings.

Term insurance policies come in a variety of forms. A joint term policy is one such type. It covers two individuals under the same plan, protecting them both from financial risks during times of uncertainty.

But, the question is - Is it better to buy a joint term policy or two separate term plans to cover two individuals? What is the better option? Let's find out.

What Is Joint Term Insurance Plan?

A joint life term insurance plan provides coverage for two individuals. It is convenient and cost-effective. In most cases, a joint term insurance plan is a popular choice among couples.

How Does A Joint Term Insurance Plan Work?

When you opt for a Joint Life Term Insurance Plan, one person will be designated as the 'primary life assured,' and the other individual covered by the plan will be the 'secondary life assured.' The insurance company will issue the policy based on the income documents of the primary life assured - in case the secondary life assured does not earn. In a Joint Term Insurance Plan, the sum assured can either be shared or separate.

If the sum assured is shared,

The death benefit will be the same for both individuals covered by the plan, and the claim will be processed based on first-death basis and then the policy will end. For example, Meena and Mohan purchase a joint term insurance plan for husband and wife with a sum assured of Rs. 40 lakhs for a policy term of 20 years. As per the policy, the sum assured is shared between both of them. They have assigned their daughter, Kriya, as the nominee. Let’s say Mohan passes away during the policy period. The claim will be processed based on first death basis. The insurance company will provide Meena, the surviving spouse, with a sum of Rs. 20 lakhs, after which the policy will terminate.

If the sum assured is separate,

The cover amount for the secondary life assured can be one of the following options –

• The same as the cover amount of the primary life assured.
• 50% of the cover amount of the primary life assured.
• 25% of the cover amount of the primary life assured.

In case of the primary life assured’s demise during the policy period, their cover amount will be paid to the secondary life assured. If the secondary life assured also passes away during the policy period, the nominee will receive the secondary life assured’s cover amount. For example, Benny and Dayal purchase a joint term insurance plan for husband and wife. Benny’s cover amount is Rs 60 lakhs. And, Dayal’s cover amount is 50% of Benny’s cover amount, i.e., Rs 30 lakhs. They appoint their son, Aditya, as the nominee. Suppose Benny passes away during the policy period, the surviving spouse, Dayal will receive the entire claim amount of Rs. 60 lakhs. If Dayal also passes away during the policy period, Aditya will receive a claim amount of Rs. 30 lakhs. After this, the policy will terminate. Note: It is important to note that the specific options and variations for a joint life term plan may differ from one insurance company to another. Each insurance company may have its own terms, conditions, and options as suited to its underwriting & risk framework. Here’s a comparison between buying joint term insurance and two separate term insurance plans to help you make a well-informed decision

Joint Term Insurance Plan Vs Two Separate Term Insurance Plans

A Joint Term Insurance Plan or Two Separate Term Plans – Which Option is Better?

Choosing between a joint term insurance plan or two separate term plans requires careful consideration of various aspects. Each option offers its own benefits, making it important to assess your specific needs and goals.

• If both individuals are similar in age and have similar lifestyles (such as both being non-smokers), a joint-term plan may be worth considering. This option allows you to have a single policy that caters to the needs of both individuals.
• On the other hand, if there is a significant age difference or different lifestyles between the individuals to be covered, separate term plans might be more suitable. This option allows each person to have a policy tailored to its specific requirements. Ultimately, the choice between a joint term insurance plan and two separate term plans also depends on factors such as age, lifestyle, and individual needs. It is important to carefully evaluate these aspects to make an informed decision that aligns with your unique circumstances.

Conclusion

The choice between a Joint Term Insurance Plan and two Separate Term Plans ultimately depends on your individual circumstances and priorities. While a Joint Term Plan offers the convenience of a single policy and premium payment, it has its limitations such as restricted cover amounts, no riders, etc. On the other hand, opting for two Separate Term Plans allows you greater flexibility in coverage, optional riders, etc. By weighing the pros and cons of each option, you can make an informed choice that provides the most comprehensive protection for yourself and your loved ones.