Summary of this article
Joint term insurance can cost 15–25 per cent less than two individual covers.
First-death vs second-death payouts define who receives benefits and when.
Best suited for mortgages and single-income couples seeking affordable protection.
Not ideal for couples with kids or unstable relationships due to single payout.
A term policy is a crucial protection tool. Couples have the option to buy joint term plans. We take a look at how such policies work and for whom they make sense.
The advantage is that joint policies are cheaper. “On average, a joint policy will cost about 15–25 per cent less than the combined cost of two separate individual policies. This is mainly due to the administrative savings and half-cover trade-off, and also the fact that the insurer expects to pay only one claim in normal circumstances,” says Pradeep Funde, senior vice president, Anand Rathi Insurance Brokers.
Types Of Joint Term Plans
There are normally two different types of joint plans, and they handle the payouts differently.
The most common cover is “first to die basis.” Here, the policy pays on the death of the first partner. The surviving spouse gets the payout. The cover here is exhausted, and it terminates.
Some modern plans have restoration options, which allow the survivor to take a new policy without medical examinations.
In the second-to-die option, the policy pays upon the death of the second partner. The children or the estate/trust will get the payout. The policy is active till both partners pass.
Who Should Buy It
These benefits are mostly for couples who are mortgage-focused and seek budget-friendly options. This means that it works for couples for whom a home loan is the primary reason for buying insurance.
It is also suitable for single-income households. These policies are also beneficial for those who are estate planners and do not want their heirs to sell off the assets.
Who Should Avoid It
Couple With Children
The policy will pay only once if both parents die. Two policies will pay twice. A joint policy will pay only once, even if the parents pass away together or years apart.
Couple With Unstable Relationships
Dividing the policy once the couple shifts is very difficult. Most of the insurers do not allow us to split the policy, which means that we have to cancel the policy and lose the premium paid.
Business Partners With Different Needs
If the financial states in a partnership are different, then the individual policies will address the issue perfectly, allowing you to customize the coverages. Whereas a joint policy will have equal stakes. This might lead to a problem.
