Before you understand term insurance for married couples, let’s first understand what term insurance is. You avail term life insurance to protect family’s future. Term insurance is the most basic form of life insurance. It is pure risk protection cover. A term insurance policy pays out the sum assured to the nominee or beneficiary, if the policyholder dies within the term of the policy. If you survive the term of the policy, you get nothing.
Breadwinners of the family must avail a term insurance policy. Term insurance serves as a substitute for income, when you are not around. Apart from breadwinners, anyone who wishes to secure family’s future can avail term insurance. Term insurance provides for family, on an unexpected demise of policyholder, within the term of the plan.
The cost of living is pretty high in big cities like Delhi and Mumbai. This has made it inevitable for both husband and wife (married couple) to work. If not, then they won’t have enough money to meet expenses. If any one of them (either husband or wife) dies, there would be loss of income. Hence, both earning husband and wife must avail term insurance.
With a wide range of life insurers and different types of term insurance policies to choose from, many married couples fail to identify the right term insurance plan. Most life insurers offer two types of term insurance plans, they are: normal term plans and term insurance plan with return of premium or TROP. Under normal term insurance plans, the premiums paid are non-refundable and go towards securing your life. Under term insurance plan with return of premium, the premiums are invested in particular instruments by the insurer and are paid back to the insured at the end of the tenure of the policy. The premiums for return of premium plans are much higher than normal term plans.
Let’s take a look at the difference in pricing of the premiums payable towards normal term plans and return of premium plans. A 40 year old (non smoker and non alcoholic) male may avail a normal term plan with a sum assured of Rs 1 crore at an annual premium of Rs 17,000, with a tenure of 30 years. With all parameters being the same, annual premiums payable towards return of premium plan may cost Rs 43,000, which is a difference of Rs 26,000 vis-à-vis normal term plans. This difference can be invested in specific investment options which offer high returns.
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SEE ALSO: What is Term Insurance Plan?
Following are few important parameters that you must consider before making the decision of availing a term insurance policy:
1. Claim Settlement Ratio: Claim settlement ratio of the insurer must be as high as possible. It depicts the number of claims settled by the insurer against the number of claims filed. Generally, insurers with a claim settlement ratio of more than 91% are considered good.
2. Turn-Around-Time (TAT): This is the time taken by the insurer to process and settle claims filed by the nominees. This should be as low as possible.
3. Good Digital Platform: Having a good digital platform which facilitates the online purchase of policy, renewal and claim filing options, would help customers immensely and eradicate the need for customers having to visit the life insurer branches.
4. Minimum on-Boarding Steps: Insurers with lower number of on-boarding steps are better and make things simple and hassle-free for aspiring life insurance policyholders.
Now, let’s understand what joint term insurance is. Joint term insurance is generally offered to married couples. Under this, both husband and wife are insured over a certain period of time. If one of the insured dies within the term of the policy, then the sum assured under the policy is paid out to the surviving partner.
Married couples have options of availing joint term policy or two individual term policies, as per their comfort. According to life insurance experts, separate term plans are better than joint term plans for married couples. Having said that, each couple must analyze their lifestyle needs and spending, while deciding between joint term policy and individual term policies.
You must note that a joint term policy terminates/ends when the surviving partner’s claim is settled and the surviving partner must then avail an individual term plan. When the surviving partner applies for an individual term plan, the premiums quoted might be high or the application could be rejected, due to high age. Considering this, some couples feel it’s better to avail individual term plans, where both husband and wife are covered across policy term, regardless of who dies first.
It is advisable for earning married couples to nominate their spouse as the beneficial nominee, if they avail individual term plans. This ensures death benefits are paid out to the surviving partner, which helps pay off liabilities and life continues with few disruptions.
Last but not the least, policyholders must truthfully disclose all requisite information, if not, claims might not be honored. Your nominee’s claim might be rejected if the insurer finds out that you have furnished wrong details/information, and the purpose of availing term insurance would not be served.
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