A term life insurance plan is one of the most basic and essential parts of any financial plan. Experts suggest that you should buy a term plan as soon as you start earning to get the advantage of low premiums. Once you get married, a term plan becomes doubly vital, as you have more people to take care of.
These days, with both partners working, a family may end up having two term insurance policies in place. An effective alternative could be to buy a joint life insurance policy. This kind of policy covers both spouses under one plan and a single premium. As with any other type of insurance, a joint policy, too, has its share of pros and cons. We take a look at the same in this article.
How does joint term life insurance work?
A joint term life insurance brings convenience to the matter of term life coverage by offering life insurance protection to both members of a married couple under one plan. Aside from the basic term plan, one has also the option to choose a joint endowment policy, which provides life coverage and has a savings component attached to it.
The functioning of a joint life plan differs from insurer to insurer and plan to plan. Most joint life policies usually have a primary policyholder and a secondary policyholder. Some plans may cover both members but may have only a single sum assured. Thus, the policy becomes void once either of the two members pass away and the sum assured is paid to the nominee.
Other plans have a large sum assured amount which gets divided between the two members. So, on the death of one policyholder, the nominee receives 50% of the sum assured. If the other policyholder were to pass away as well, the nominee would receive the remaining sum assured amount. Some policies waive off the premiums after the demise of the primary policyholder but may require regular premiums if the secondary policyholder passes away first.
Now that the workings of a joint life policy are clear, let’s look at the pros and cons of this type of insurance coverage.
Pros of a joint life policy
- Comparatively low premiums
If you were to estimate the premiums for two policies on the term insurance premium calculator, the total of both policies would be higher than that of a single joint life policy. This is one of the main reasons couples looking to buy term insurance prefer one joint policy over two separate term plans. The insurer usually charges a lower premium, especially if it is a basic term plan.
- Lesser hassle
Buying and managing a policy can get a bit difficult sometimes. You have to ensure that the policy you are buying suits your and your family’s needs. You have to make sure that the insurer is a reliable one, with a good claim record. This process has to be repeated if both the partners are looking for a term cover. Rather than go through the process separately, a couple can instead research together and buy a joint term life insurance plan.
Cons of a joint term life plan
- No option to customise as per one’s needs
As its name suggests, a joint life plan takes both the persons into consideration. However, this also means that if one member wishes to opt for one feature in a joint endowment policy, but the other member does not, the feature cannot be included in the plan. There is no option to include one spouse under one feature while excluding the other. If one person is at risk for critical illness, then the premium for the critical illness insurance has to be borne by both members.
Thus, an individual may not get the chance to buy a plan that suits their particular needs only.
- Joint coverage is not needed in most cases
If the spouse is a homemaker, then some experts suggest that there is no include them in a term plan, since the purpose of a term plan is to act as a replacement for the breadwinner’s income. And if the spouse has a high-paying job, then they may be able to pay for the household expenses even after the demise of the other spouse. In both scenarios, joint coverage need not be a necessary expense.
Thus, one must consider their current and future lifestyles, their budget, and their insurance requirements carefully before buying a joint term life insurance plan. If you wish to buy a separate plan, then you must surely use a term insurance premium calculator to get the premium estimate of your plan before proceeding.