Joint-Term Insurance: Here’s Why It Is Considered A Good Product For Couples

A joint-term insurance policy provides financial protection for both spouses in the event of either partner's death. It ensures convenience and reduces hassle by managing two separate policies collectively, with shared payments and benefits. Rather these are often more cost-effective than purchasing two separate policies for each individual because insurers offer discounts for covering multiple individuals under one policy. Rhishabh Garg, head - term insurance, Policybazaar.com said, “However, if there is a significant age gap between the spouses, if one spouse is considerably less healthy than the other, or if one spouse engages in risky behaviors like smoking, it can lead to higher premiums for the joint policy. Policyholders must know that joint-term insurance policies aren’t suitable for individuals with different insurance needs or financial situations. For example, if one partner has significantly higher income or financial obligations, they may require a larger insurance policy than the other. Likewise, if the the relationship between the insured individuals changes, such as divorce managing a joint policy can become complicated.” 

“Lastly, policyholders must know that in the unfortunate event of one spouse passing away during the policy term, the surviving spouse receives the death benefit. However, with some insurers, the coverage for the surviving spouse ceases once the death benefit is paid out, whereas in other plans, the coverage for the remaining individual continues. Thus, policyholders must understand the terms and conditions of their policy thoroughly,” Garg said. 

According to experts, joint-term insurance is a single-term insurance plan that is bought by a couple, or any two individuals like a parent and a child, pays a single premium, and gets the death benefit when something happens to one of the partners. “It is a cheaper way to get term insurance for two individuals. If one of the policyholders passes away, the death benefit is given to the surviving partner and the policy terminates. As the modern family structure requires both partners to work and earn, both husband and wife must be insured so that if anything is to happen to either of spouses, the other remains financially stable,” Amar Ranu, head - investment products & insights, Anand Rathi Shares and Stock Brokers said. 

Pros Of Joint Term Insurance Plan: 

• Cost-Effectiveness: Joint term insurance is generally less expensive than buying two separate term plans, making it a cost-effective option for couples.

• Simplicity: Easier to manage one policy for both partners than two separate policies.

• Comprehensive Coverage: It provides financial security to the surviving spouse, reducing the financial burden during a difficult time.

• Simplified Management: Managing one joint policy is easier and less time-consuming than handling multiple individual policies.

• Unified Coverage: “Provides financial security for both spouses under a single policy, ensuring that the surviving partner receives the death benefit upon the demise of the insured spouse,” says Col Sanjeev Govila (retd), Certified Financial Planner, CEO, Hum Fauji Initiatives, a financial advisory firm. 

Cons Of Joint Term Insurance Plan: 

• Limited Flexibility: Offers limited options to tailor coverage individually for each spouse, potentially leading to under-insurance or over-insurance for one of the partners

• Dependency On Relationship Status: “The joint policy is complicated by changes in relationship status, such as divorce, making it less flexible compared to individual policies,” says Govila. 

Should more features be added to the currently offered joint-term insurance plans in India to make them more useful?

• Flexibility In Coverage Adjustment: “Introduce options to adjust the coverage amount individually for each partner based on changes in life circumstances, such as after having children or significant income changes,” adds Govila. 

• Rider Inclusions: Enhance policies with critical illness riders or disability benefits, offering broader protection and addressing specific health-related financial risks.

• Breakup Clause: Implement provisions for policy division in cases of separation or divorce, allowing each partner to retain some coverage independently.