What is a joint term insurance plan? It is a single term plan that covers two people. Usually, married or unmarried couples opt for this plan but business partners also buy it sometimes. This plan is particularly beneficial for parents since they can financially protect their children with this policy in the event of their unpredictable demise. This kind of insurance is cost-effective since it is a single policy that covers two individuals while the premium charged is for one.
Read on to know more about joint term life insurance.
Types of Joint Term Insurance
Based on the offered benefits:
- Joint Term Plan: It offers the benefits of a single term plan to two policyholders, as you can guess from its name. If one of them has an unfortunate demise, the other policyholder receives the cover. After that, the plan may or may not keep on providing for the survivor. In either case, you can’t avail any money-back option.
- Joint Endowment Plan: This works just like a typical endowment plan. Here, you need to pay premiums regularly and get the payout in one of two ways. Once one of the insured persons dies during the policy period, the other holder can receive the claim. Alternatively, you can receive a predecided amount back at the term’s end.
Based on the receipt of benefits:
- First-to-Die: In this case, the death benefit is given after the first policyholder’s death. Usually, this kind of joint term insurance helps with income replacement in a family. If one of the policyholders dies and the other holder is the beneficiary, the latter person gets the sum assured. This relieves the survivor of any extra financial burden and helps the loved ones to keep up their quality of lifestyle.
- Second-to-Die: Also called survivorship policy, it pays out the death benefit after both the policyholders die. When the first holder dies, the plan doesn’t provide the survivor with income replacement. However, the beneficiaries of the insured get the payout.
Things to Consider Before Buying Joint Term Insurance
- This kind of insurance is more cost-effective for two-income families. It offers coverage to a family which has two earners.
- The survivorship plan allows the surviving policyholder to have higher control over planning the transfer of assets. It happens only after both the policyholders have died. This lets the survivor encash the plan’s cash value if required.
- The survivor might need to buy extra coverage at a higher price. In a first-to-die policy, the survivor needs to avail a new plan which would cost more at a later age.
- If any of the policyholders has health problems, a joint plan can be more expensive than an individual cover. The cost of life insurance is determined by the average life expectancy and health status of both policyholders. If one policyholder is not as healthy as the other, a higher premium will be charged. Plus if one holder smokes regularly or there is a major age gap between the insured people, the overall cost will be higher.
If you keep the above things in mind, you can better choose between a joint term plan or two single term insurance plans for you and your partner.
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