If you are married, you have a couple of options when it comes to term life insurance. You can either avail a joint term life insurance or two individual term insurance policies.
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Which term insurance should you buy? This article will help you decide:
A joint term insurance plan covers you and spouse under a single policy. Initially, term insurance was targeted at breadwinners, who were mostly men. But in the recent years, this trend has changed. An increasing number of women are working. Therefore, both husband and wife are the breadwinners in a family. This trend compelled insurers to design a term insurance plan that covers couples under a single policy. So, the joint term insurance plan was launched.
As the couple is covered in a single policy, they pay a combined premium. If one of the partners happens to die during the policy tenure, the surviving partner gets the death benefit. Joint term life insurance plans are available in different variants, based at the life insurer’s discretion:
Let’s have an example:
X and Y bought a joint term insurance plan when X was 35 years and Y was 32 years. They opted for a term period of 25 years with a sum assured of Rs 1 Crore. Let’s say, X dies in the 10th year of the policy. Let us study the claim settlement:
1. On the death of X in the 10th year of the policy, the insurer will pay Rs 1 Crore to the surviving partner, Y, who is also a nominee. The policy terminates thereafter; OR
2. Depending on the policy terms, the policy continues with or without waiver of premium. The policy terminates on the death of Y, or when the policy matures, which happens first; OR
3. Y is paid Rs 1 Crore. The insurance company will continue to pay a monthly payout for say, 5 years, at the rate of say, 2% of sum assured. Therefore, a sum of Rs 2 Lakhs each month for 5 years is paid to the nominee. The total payout will be Rs 2.2 Crores.
Consider family requirements and the pros and cons of both types of policies before deciding which term insurance plan is best for you. Also, keep in mind the following:
1. A joint term insurance plan is suitable for middle-aged couples. The premiums of term insurance tend to get costly with age. Therefore, buying two separate term insurance plans at middle age will be expensive.
2. For couples having different lifestyles, like one partner is a smoker and the other is a non-smoker, premiums would be higher.
3. It is wise to buy a joint term insurance plan at a young age as the premiums will be lower.
Keep in mind:
If a surviving partner dies during the monthly payout period, the monthly payment will be paid to the legal heir as mentioned in the policy documents.
If both the partners die together, the death benefit will be paid to the legal heir as mentioned in the policy document. However, the insurance company will not pay the monthly payout.
Either of the partners will have to pay the premium in full if they want to keep the policy in force. In any case, it is wise to talk to your insurer to avoid such problems. Check if the insurer offers a joint term insurance policy which can be split if the couple goes for a divorce. If you avail two separate term insurances for both the partners, these issues will not crop up.
Browse through web aggregators offering online term insurance comparison tools and choose the best one.
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