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What is a Joint Term Insurance Plan? Key Benefits of Joint Term Plan

With the rise in dual-income households, joint term insurance has become essential for securing financial stability and ensuring the future well-being of dependents.

  • 7,212 Views | Updated on: May 20, 2024

If you are the sole breadwinner of the family, getting a term insurance plan is a brilliant way to protect your family in the event of an unfortunate incident. However, if you and your spouse are in the workforce, your family’s financial stability depends on both individuals.

Key Takeaways

  • Joint term insurance provides coverage for both spouses under one policy, potentially saving on premiums compared to two separate plans.
  • While term insurance covers a single individual, joint term insurance covers both spouses under one policy, offering potentially lower premiums but less flexibility.
  • Joint term insurance plans are not restricted to married couples; any two individuals can opt for this policy to safeguard each other’s future.
  • These plans offer various advantages, including cost-effectiveness, and tax benefits on premiums and death benefits.
  • Joint term insurance is suitable for couples or partners sharing financial responsibilities, or seeking cost-effective coverage.

Getting separate term insurance plans can help you prepare for the future but may not be cost-efficient. This is where the joint term insurance policy comes into the picture.

What is Joint Term Life Insurance?

As the name suggests, joint term insurance will cover both husband and wife under one policy. Given the increasing number of women joining the workforce, a joint term plan will promise the financial stability of the household in case anything happens to a member of the policy. Like an individual term plan, the premium must be paid regularly for joint term coverage. In the event of an unfortunate demise of one member during the policy tenure, the other can file for the claim to get the coverage amount.

While the joint term life plan may be perfectly suitable for married couples, there is no restriction on who can get the policy. Any two individuals can get the joint term insurance plan to safeguard the other’s future.

Difference Between Term Insurance vs Joint Term Insurance

Before you start confusing between term insurance and joint term insurance, let us take a quick look at the difference between these two:

Aspect

Term Insurance

Joint Term Insurance

Coverage

Provides coverage for a single individual.

Provides coverage for two individuals (typically spouses) under one policy.

Premium

Premiums are based on the individual’s age, health, and coverage amount.

Premiums are often higher than individual policies due to increased risk, but can be lower than the combined premiums of two separate policies.

Flexibility

Offers flexibility to customize coverage according to individual needs.

Offers less flexibility as it covers both individuals under one plan, which may not suit changing circumstances or needs.

Dependency

Suitable for individuals who need coverage for themselves or their dependents.

Suitable for couples who want joint financial protection for their family.

Conversion

Typically does not allow conversion into a joint policy.

May allow conversion into two separate individual policies if the relationship changes or if preferred.

How Does Joint Life Policy Work?

Insurance companies provide two categories of joint life insurance, each offering a sole death benefit but varying in terms of payout circumstances.

First-to-Die Joint Life Insurance

In this type of life insurance, when one of the policyholders passes away, the surviving policyholder is entitled to receive the death benefit. This financial support can be crucial in the absence of their partner. However, no further benefits are provided once the death benefit is paid and the surviving policyholder’s life insurance coverage is terminated.

Second-to-Die Joint Life Insurance

Also known as survivorship life insurance, second-to-die life insurance pays out the death benefit after the demise of the second surviving policyholder. This implies that neither policyholder receives the death benefit; instead, it is directed to the beneficiaries designated in the joint policy.

In the case of second-to-die life insurance, if the first policyholder passes away, the responsibility falls on the surviving policyholder to continue paying premiums to uphold the coverage.

Key Benefits of the Joint Term Insurance Plan

Joint term insurance plans are designed to cover two individuals under a single policy, offering a range of benefits that go beyond traditional term insurance

Joint Term Plans are Comparatively Cheaper

One of the most notable benefits of getting a joint term insurance plan is the savings a married couple can get through this plan. Buying two individual policies can be quite costly compared to getting the joint term plan. Paying premiums on two separate policies will be higher than paying the premiums on a single plan. This feature can help a newly married couple increase their nest egg of savings as they start a new life together.

Replacement of Lost Income to the Beneficiary

The policy you choose can make quite a difference in the payout options you get through it. The plan offers you the flexibility to choose the claim you make. For example, you can opt for the entire amount to be paid out in lump sum to the beneficiary or the amount to be paid out in monthly installments.

The monthly installments the beneficiary gets through the policy will help them better plan their finances and act as a steady flow of income.

Income Tax Benefits on the Premium Paid and the Death Benefits

The premiums paid for the policy are tax deductible under Section 80C of the ITA (Income Tax Act). Apart from this, the death benefit that the beneficiaries may get is also exempt from tax under Section 10 (10D).

*The tax benefits received through a term plan will vary based on the changes in the tax laws.

Types of Joint Life Policies

If you are seeking a joint term insurance policy to provide comprehensive protection, you have options, just like with any other insurance plan. It could be an endowment plan or a simple term plan. Here are the different types of joint term life insurance policies available for policy buyers:

Joint Term Plan

A joint life policy, like a conventional term plan, requires you and your spouse to pay a premium for a set length of time to stay protected. During this time, you can collect the life insurance amount if one of you is involved in an unfortunate incident. Once this is completed, the combined life policy’s coverage will be terminated.

Joint Endowment Plan

The combined endowment plan offers investment as well as insurance benefits. It is only good for a certain time, generally before your retirement begins. When your coverage expires, the insurance company will pay you a lump sum of money known as an endowment. A combined endowment plan operates in the same way as a conventional endowment plan, with the exception that the endowment plan pays the insured couple after the insurance has expired.

This is true even if one of the policyholders is involved in a terrible situation. When the agreed-upon period expires, the surviving partner will receive the cover and the endowment money. Endowment plans can also receive maturity benefits.

Benefits of Joint Life Policy

Unlike individual policies, joint life insurance covers two individuals, typically spouses or partners, under a single plan. This unique approach offers a range of benefits that cater to couples’ diverse needs and goals.

Cost-efficiency

One of the primary benefits of a joint term insurance policy is its cost-effectiveness. Premiums for joint policies are generally lower than the combined cost of two individual policies. This is because insurers consider the joint life policy as covering two lives with a reduced risk of both individuals passing away simultaneously. Couples can thus enjoy comprehensive coverage at a more affordable rate, making joint term insurance an attractive option for those looking to maximize their insurance budget.

Simplified Administration

Managing finances and insurance policies can be complex, especially when dealing with multiple individual policies. Joint life insurance simplifies the administrative aspect by consolidating coverage for both individuals under a single plan. This streamlined approach reduces paperwork and makes it easier for beneficiaries to navigate the claims process in the event of the policyholder’s demise.

Survivor Benefits

One of the key features of joint life insurance is the survivor benefit. In the event of the death of one policyholder, the surviving spouse or partner receives the death benefit. This ensures that the surviving individual is financially protected, helping them maintain their lifestyle, pay off debts, and cover ongoing expenses.

Estate Planning Advantages

Joint life insurance can also play a significant role in estate planning. The death benefit from a joint policy can be structured to provide liquidity for estate taxes, debts, and other financial obligations. This can be particularly beneficial for individuals with substantial assets, as it helps preserve the estate’s value and ensures a smoother transfer of wealth to heirs. The ability to integrate joint life insurance into a comprehensive estate plan adds another layer of financial security for the future.

Flexibility In Coverage

Joint life insurance policies often come with flexible coverage options. Couples can choose the type and amount of coverage that best suits their needs, whether it is term life insurance for a specific period or permanent life insurance that provides lifelong protection. This flexibility allows couples to tailor their insurance to match their unique financial goals and circumstances

Tax Benefits

Premiums paid for joint term insurance are tax-deductible up to certain limits. By opting for a joint policy, couples can maximize their tax benefits as they can pool their premiums together under one plan. Additionally, some tax laws allow for tax-free death benefits, meaning that the payout to beneficiaries upon the death of one spouse may not be subject to income tax.

Drawbacks of Joint Term Insurance

Like any other plan, Joint Term insurance plans also have some drawbacks or limitations to them. Take a quick look at these drawbacks:

Payout for Only One Death

One significant drawback of joint term insurance is that it typically provides a payout only upon the death of one of the insured individuals. While this may seem logical, it means that if both spouses pass away simultaneously or within a short timeframe, the policy might only pay out once. This limitation could leave dependents or beneficiaries of joint term insurance financially vulnerable if both partners are no longer around to provide support.

Conversion into Single Term Insurance

Another drawback is that joint term insurance policies often lack flexibility compared to individual policies. If the couple separates or divorces, converting the joint policy into two separate single policies can be challenging. Lack of flexibility in adjusting the coverage to individual needs can be a significant drawback for couples who may experience changes in their relationship status.

Higher Costs

Joint term insurance policies may also come with higher costs compared to separate individual policies. While it might seem more convenient to have both spouses covered under one plan, insurers typically charge higher premiums for joint policies to account for the increased risk of paying out for either spouse’s death. Over time, these higher costs can add up, potentially making joint term insurance less cost-effective than separate policies tailored to each individual’s needs and circumstances.

Who Should Get a Joint Life Policy?

Joint term insurance policies can be a valuable financial tool for couples and business partners seeking cost-effective and convenient coverage. However, it is crucial to carefully assess individual circumstances, financial goals, and the dynamics of the relationship before deciding on a joint life policy.

Couples with Shared Financial Responsibilities

Joint term insurance is well-suited for couples who share financial responsibilities and depend on each other’s income to meet their financial needs. This includes couples with joint mortgages, shared debts, or dependents who rely on the income of both partners.

Cost-conscious Couples

These joint term insurance policies are more affordable than purchasing separate policies for each individual. If budget constraints are a concern, a joint term insurance policy can offer adequate coverage at a lower premium, making it an appealing option for cost-conscious couples.

Estate Planning

Couples with significant assets may use joint life insurance as part of their estate planning strategy. The death benefit from a joint term insurance policy can help cover estate taxes, ensuring that the surviving partner can maintain their financial stability without the burden of additional financial obligations.

Similar Health and Age Profiles

Joint term insurance plans are typically issued based on the health and age of both individuals. If both partners are in relatively good health and have similar age profiles, they may qualify for more favorable premium rates, making a joint life policy an attractive option.

Considerations Before Choosing a Joint Life Policy

Joint term insurance is a unique option that covers two individuals under a single policy, making it a popular choice for couples. Before you decide on a joint life policy, it’s crucial to understand the intricacies involved and consider various factors to ensure the chosen policy aligns with your financial goals and needs.

Assess Financial Responsibilities

Assess the extent to which you and your partner share financial responsibilities. If your financial obligations are largely independent, individual policies may be more appropriate.

Future Insurability

Consider the potential impact on insurability if one partner were to develop a health condition. Joint term insurance policies terminate when the first partner passes away, and the surviving partner may face challenges in securing new coverage if their health status has changed.

Long-term Financial Goals

Evaluate your long-term financial goals and whether a joint term insurance policy aligns with those objectives. If each partner has unique financial goals or estate planning needs, separate policies may be more suitable.

Review of Policy Terms

Thoroughly review the joint term insurance policy terms and conditions, including how the death benefit will be distributed and any limitations or restrictions that may apply.

Summing Up

With an increase in the number of women entering the workforce, getting life insurance for both the husband and wife has become essential. Getting insurance coverage for both will safeguard the house’s financial stability and secure the dependents’ financial future, especially the children. This joint term insurance plan is not restricted to married couples. You can ensure your child’s future by getting the plan with them. The joint term insurance plan can help a newlywed couple plan for their future by helping them save and also provide tax benefits.

FAQS On Joint Term Insurance


1

What are the disadvantages of joint life insurance?

Joint term insurance typically covers both spouses under one policy, but it comes with drawbacks. If one spouse passes away, the surviving partner may lose coverage or face higher premiums if they want to continue. Additionally, if the relationship ends, splitting the policy can be complicated. Another drawback is that joint policies often have limited flexibility compared to separate policies.



2

Can husband and wife take term insurance together?

Yes, husband and wife can take term insurance together. Many insurance companies offer joint term insurance policies specifically designed for couples. These policies provide coverage for both spouses under one plan, offering convenience and potentially lower premiums compared to separate policies.



3

Is there life insurance for couples?

Yes, there are life insurance options specifically tailored for couples. Joint term insurance policies allow couples to be covered under one plan, providing financial protection for both partners. These policies can offer convenience and potentially lower premiums compared to separate policies. However, it is essential to review the terms and coverage options carefully to ensure they meet the couple’s specific needs and circumstances.



4

Which type of joint life policy should I get?

The choice of joint term insurance policy depends on your specific needs and circumstances. There are two main types: first-to-die and second-to-die policies. The first-to-die policy pays out upon the death of the first insured person, while the second-to-die policy, also known as a survivorship policy, pays out when both individuals have passed away.



5

Is it better to get a joint life policy instead of separate plans?

The decision between a joint term insurance policy and separate plans depends on your goals and preferences. Joint life policies are often chosen by couples for their cost-effectiveness and simplicity, covering both individuals under a single policy. However, separate plans provide individual coverage, allowing for customization based on each person’s unique needs.



6

How is the death benefit payable in a joint life policy?

The death benefit in a joint term insurance policy is typically paid out upon the death of one of the insured individuals. The payout is made to the surviving policyholder or beneficiaries, as specified in the policy. The process is straightforward, with the insurance company disbursing the agreed-upon amount to the designated recipients.



7

How much tax benefit do I get with a joint life policy?

Tax benefits associated with a joint life policy may vary based on your jurisdiction and local tax laws. In many cases, the premiums paid for life insurance are not typically tax-deductible. However, the death benefit paid out to beneficiaries is often tax-free. Additionally, some regions may offer tax advantages for joint policies, encouraging couples to secure coverage together.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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