Insurance Industry News

Joint life term insurance plans: Here is what you should know about the policy before buying

On special occasions like marriage anniversary, spouse’s birthday or festive season, now you can plan to gift a joint life term insurance plan to your loved one. This plan provides the facility of protecting both your spouse and you in the same life insurance policy.

Khalid Ahmad, Head – Products, PNB MetLife told Moneycontrol that this is a tailor-made term life insurance plan designed to protect the couple. This joint life cover term plans are suitable not only for working couples but also for couples where one spouse is a homemaker.

Key features of a joint life term insurance plans

Some of the life insurance companies offering a joint life term insurance plans are Bajaj Allianz Life, PNB Metlife, Aditya Birla Sun Life, Edelweiss Tokio Life, etc. This plan is primarily useful to cover housewives who do not get a term plan easily. Through this feature, a homemaker also gets covered under the same policy as her spouse. The best part is that the cover gets extended to both working and non-working spouse (wife).

Anilkumar Singh, Chief Actuarial Officer, Aditya Birla Sun Life Insurance said, “Having this policy cover two lives makes it easier to track payments, benefits and other allied services of a single policy than two separate plans, especially at the time of claims.”

While buying this policy, the primary policyholder needs to be an earning member of the family. In most of the policies, the sum assured applicable for spouse (secondary holder) will be equal to 50% of the primary policyholder’s applicable sum assured. However, there are other variants of the joint life term plans in the market.

Santosh Agarwal, Associate Director and Cluster Head- Life Insurance, Policybazaar.com said, “In PNB MetLife – Mera Term Plan, the maximum cover for partner is Rs 25 lakh. Also, the life cover for spouse continues in the absence of the primary insured and all the future premiums are waived off in this plan.”

Whereas, in Edelweiss Tokio – Zindagi Plus plan, buyer of the policy needs to buy additional benefit which can be selected only at the policy inception and known as ‘Better Half Benefit’. This additional benefit is available only if the base sum assured is greater than or equal to Rs 50 lakhs. Under this policy, in case of death of the life insured (primary holder) before the maturity date while the policy is in-force and if his/her spouse is alive, following benefit will be applicable in addition to payment of sum assured on death.

i. Life cover will commence on the life of the spouse and will continue for the remaining policy term. Upon the death of the spouse before the maturity date, the better half will receive the death benefit in form of sum assured which is 50% of the base sum assured or Rs 1 crore whichever is lower.

ii. No future premiums will be required to pay by the spouse.

Some of the insurance experts believe, buying joint term plans are more cost effective as compared to purchasing two separate term plans. Given below is an illustration table with total cost of premium of this policies.

Joint life term insurance plans Vs Separate term plans for a couple

Rakesh Goyal, Director, Probus Insurance Broker suggested having individual life term plans for a couple.

He said, “There are multiple benefits of having individual term plans as one can get higher cover, also if one policyholder dies than, other policy is in force which is not the case with some of the joint life term insurance plans.”

Also, with separate term plans, both the policyholders have the liberty to choose add on covers and benefits to suit their personal requirements which is not provided with joint life term plans.

Deriving sum assured in joint life term insurance plans

Singh said, “In a joint life term insurance plan, the sum assured is calculated post assessing the age, income, medical condition and lifestyle of the primary policyholder.” While, for the spouse or the secondary policyholder, only the age and the medical condition is checked before deriving the sum assured. Whether the secondary life assured or the spouse is working or not does not matter while buying the plan.

Benefits of buying joint life term insurance plans

Most important benefit of this joint term plans are waiver of premiums feature. Ahmad explained, “If you have purchased a joint life term plan, and some uncertainty (demise) were to happen to you while the policy is in force, spouse would no longer have to pay premiums in the future and her coverage will continue.” Further, your spouse would receive an assured lump sum immediately and the cost of premium will be less than buying two separate life term insurance plans.

Drawbacks

Goyal cautioned, “The major drawback of this policy is that, if both the insured person dies in an accident only single death related payment will be made to the nominee.” Apart from that, if the couple decided to take divorce and leave separately, then policy becomes void. Since, the policy cannot be split and it has to be terminated.

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