Ch. 28: Joint Life Term Insurance

In one of our previous articles, we discussed the various types of term insurance plans available today. Insurers sell several types of term plans that differ based on the premium payment term, the number of people they cover, the benefits they offer, and so on. Today, we dive deeper into one of these types - the Joint Life Term Insurance Plan.

Let’s see how this plan works, how it can benefit you, when you should consider buying it, and more.

Joint Life Term Insurance, as the name implies, covers two individuals under a single term insurance policy.

Type 1:
If you buy a Joint Life Term Plan, you will be the primary life assured and your spouse will be the secondary life assured. The cover amount for both you and your spouse will be separate under the plan. The cover amount of your spouse, i.e., the secondary life assured can either be the same as your cover amount - or it can be 50% or 25% of your cover amount. (This will depend on the insurance company you buy from.)

In case of the unfortunate demise of one spouse, the cover amount of that spouse will be paid to the surviving spouse. And in case of the death of the surviving spouse during the policy term, the cover amount of that spouse will be paid to the nominee.

Example:
Aman and Preeti buy a Joint Life Term Plan for a tenure of 60 years. Under the plan, Aman’s cover amount is Rs. 1 Crore and Preeti’s cover amount is Rs. 50 Lakhs. Their 20-year-old daughter, Kainaat, is the nominee under the policy.

Let’s assume Aman passes away in the 45th policy year and Preeti passes away in the 55th policy year. Let’s see how much the claim will be paid, and to whom, in both these cases.

• Aman passes away
  Let’s say Aman passes away because of a heart attack in the 45th policy year. In this case, the insurance company will pay the claim of Rs. 1 Crore to the surviving spouse, i.e., Preeti.


• Preeti passes away
  Let’s say Preeti passes away due to an accident in the 55th policy year. In this case, the insurer will pay the claim of Rs. 50 Lakhs to their daughter Kainaat.

Type 2:
In some joint life term insurance plans, the cover amount for both the life assured is the same - and the claim is made on a first death basis. Meaning, the insurer will pay the claim on the death of any one of the life assured, and the policy will terminate thereafter.

Example:
Sanjay and Riya buy a Joint Life Term Plan for a sum assured of Rs. 2 Crores and a duration of 75 years. As per the policy terms, the claim will be payable on a first death basis and once the claim is paid, the plan will end. Let’s say Riya passes away in the 70th policy year. In this case, the insurer will pay a claim of Rs. 2 Crores to Sanjay, and the policy will terminate.

Here are a few benefits of buying a Joint Life Term Insurance Policy -

• Affordable pricing
  Term insurance, no doubt, is one of the cheapest types of life insurance plans available today. But the premium paid for two term insurance plans could still be higher compared to the premium paid for a Joint Life Term Insurance Policy. So, a Joint Life Term Plan can be quite affordable compared to buying two separate term insurance policies.


• Easy maintenance
  Since two people are covered under a single policy, it reduces the hassles of managing separate policies. It becomes easier to keep track of the policy premiums and renewal.


• Waiver/ Reduction in premiums
  In case of the unfortunate death of one of the life assured, some insurance companies will waive off or reduce the remaining premiums under the Joint Life Term Plan. This lessens the surviving life assured’s financial strain of paying the premiums.


• Tax benefits³
  Joint Life Term Plans also offer tax advantages³ under the Income Tax Act of India, 1961.
  • Under Section 80C, you can avail tax deductions on the premiums you pay every year under the policy.
  • Under Section 10(10D)⁴, the term insurance claim paid by the insurance company is exempt from tax (Subject to fulfilment of conditions u/s 10(10D)⁴ w.e.f. 31-Apr-2023.

Based on the income documents of the primary insured spouse, a joint life term insurance cover for a home-maker or a non-earning spouse is available too. It is believed that even the non-earning spouse (home-maker) makes an indirect financial contribution to the family by way of doing household chores & attending to the children/elderly.

The untimely demise of such home-maker spouses would have an adverse impact on the finances of your family as you would need to hire domestic help to shoulder the vital responsibilities previously undertaken by the spouse. However, if you buy a joint life term insurance policy for your home-maker spouse, the expenses of all these things will be taken care of by the policy.

So, that is all about how a Joint Life Term Insurance Policy works. You can consider buying this if you want to cover both yourself and your spouse under a single policy.