Historically, life insurance was availed only by the primary breadwinner to protect the financial stability of the family in case of an unfortunate event. Today, both spouses are working and coverage for both becomes necessary. Instead of choosing an individual policy for both, you may opt for joint coverage.
Understanding joint life coverage
As suggested by the name, joint policies cover both spouses under a single plan. It is a comprehensive plan offering several benefits to you and your spouse. A joint life policy pays the insurance benefits in case of the demise of either of the spouses. In some instances, the pre-defined surviving members are paid regular income in case of an unforeseen event.
Here are some features of joint life insurance policies:
- The payout is on first claim basis, which means the policy benefits are paid on the demise of either of the insured and thereafter the plan is terminated
- Some joint plans continue to remain active until both the spouses pass away
- Certain policies provide regular income for a pre-specified period
- In case the demise occurs due to an accident, the surviving spouse may receive additional benefits over and above the death benefits under certain joint life insurance plans
- You may include riders for additional coverage by paying an extra premium
- The premium paid and the policy benefits are eligible for tax benefits under section 80C and 10(10D) of the Income Tax Act
Need for joint coverage
The rise in double income nuclear families has resulted in an increased demand for joint plans. As both spouses contribute towards household expenses and debt liabilities like home loans, the impact on the financial well-being is impacted due to the death or disability of either of them.
Joint plans are also advantageous if you have young children or outstanding loans. The policy benefits payable in case of an untoward incident will be significantly higher than the premiums paid. This helps in ensuring the financial stability of your family in case anything unfortunate happens to you or your spouse.
Joint plans versus individual plans
Like many, you may consider buying individual terminsurancethat provides higher coverage for a lower premium. However, here are some things to consider before making your decision:
- Terms and conditions
In a joint policy, both the spouses are insured under the same terms and conditions. On the other hand, separate plans may be availed as per individual requirements.
- Restriction related to death benefits
Most joint policies pay a single death benefit. Incase both the spouses pass away due to an accident, only a single benefit is paid to the beneficiaries. This limitation is not relevant when both opt for individual life insurance plans.
- Loss of coverage in case of demise of one spouse
Once the single death payout is made, the surviving spouse does not have life coverage. Buying a new plan at that time may be more expensive due to age or health issues.
- Separation or divorce
In a joint life plan, coverage cannot be divided in case of divorce or separation. In the case of an individual plan, there is no such issue.
Paying the premium on individual plans may be beyond your financial budget. To avoid the aforementioned limitations, you may consider a joint policy with clauses and riders to avail of a comprehensive life cover for yourself and your spouse.