JOINT TERM INSURANCE PLAN vs. TWO SEPARATE TERM PLANS – WHICH OPTION IS BETTER?

2-July-2021 |

What is Term Insurance?

Term insurance is the purest type of life insurance that provides coverage for a specified “term” of years. A fixed death benefit is paid to the nominee in the event of the insured person’s unfortunate death during the period specified in the policy. A term life insurance is an affordable option and has great coverage, due to which it is liked by people who wish to secure their families financially in the future. It provides a high lump sum claim at a very low premium rate. Many riders# or value-added benefits can be combined with a basic term plan

 

 

 
Joint Term Insurance

 

Joint term insurance is a relatively new concept. It started developing after women started joining the workforce. Since women also contribute to the family’s income, it is important that both partners be insured. Joint term insurance is term insurance that covers both partners in the same policy. In the case of the sudden demise of a partner due to the causes listed in the policy document, the other is entitled to the sum assured as the death benefit. If both die at the same time, the children get the sum assured. The premium payment towards the policy is eligible for a tax* deduction under Sec 80C of the Income Tax Act.

 

Joint term insurance provides multiple options for claim payout that includes:

 

  1. In the case of the death of either partner, the surviving partner gets the sum assured as a lump sum payment, and the policy ends after that.

  2. In the case of the death of a partner, the other receives the sum assured, and the policy covers the other policyholder till the end of its term or till the demise of the surviving partner.

  3. Upon the death of one partner, the sum assured is given to the other in the form of the death benefit as a combination of lump sum and regular payments for a fixed term.

 
Advantages of Joint Term Insurance
 
 
  1. Money-saving on premiums – Term life insurance is affordable, but the premium paid towards two policies is still higher than that paid for a joint term policy. Therefore, these are suitable for couples looking for a time- and cost-saving option.

  2. Various payout options – A joint term plan provides various claim payout options to choose from to suit the requirements of different people.

  3. Tax*Benefits – The premium paid towards a joint term life plan as well as the benefits received by the plan are covered under the provisions of the Income Tax Act, 1961.

  4. Availability of riders# – Joint term policies are available with riders that enhance the coverage. The premium of a rider is charged over and above the base plan.

  5. Maintenance is easy – Since both partners do not have to pay the premium separately, either can do it, as both have access to the policy account. It becomes easy to maintain in case one of them forgets to pay the premium.

 
Disadvantages of Joint Term Insurance
 
 
  1. Only one death payout – In a joint term policy, only one payout is offered in the event of the demise of one of the policyholders. Even if both partners die, the beneficiary is entitled to only one death benefit. But term insurance allows the beneficiary to receive separate benefits for both.

  2. Conversion into single term insurance – In the case of a divorce, the joint policy needs to be converted into a single term policy. If one of the partners refuses to make payments, the entire burden shifts to the other partner.

  3. Higher costs – Even though joint term life insurance is an affordable option when two individuals are covered under the same policy, the cost of such insurance goes up.

 
Joint Term Insurance vs. Single Term Plan Suitability
 

Term Insurance
 
  1. It is advisable for young individuals as the premium will be lower.

  2. This is suitable for couples with a significant age gap because the premium payment will be difficult to evaluate according to age and the sum assured in a joint term insurance policy.

  3. If one of the partners is a smoker, it is advisable as the sum assured and the premium would differ.

 
Joint Term Insurance
 
  1. It is suitable for middle-aged couples as premium payments for two separate policies might get costly.

  2. It is fit for couples who do not have a significant age difference.

  3. If both partners have the same lifestyle, this is suitable. This is because if one of the partners smokes, it might lead to higher premium payments.

 

Buy Term Life Insurance/Joint Term Insurance Online

 

To buy term insurance/joint-term insurance offered by Tata AIA Life Insurance, one only needs to follow this process:

 

  • Visit the official website.

  • Select the plan they want to buy.

  • Provide basic details.

  • Enter the OTP you receive on the contact number you provide.

  • Verify the premium and other plan details.

  • Pay the premium.

  • You will receive a soft copy of the policy at the registered email address.

 
Conclusion

 

Before finalizing whether to buy separate term insurance plans or joint life insurance, you must understand your needs and your family’s requirements. Both options have their set of pros and cons that you must consider before buying. Compare the premium paid yearly under joint and separate term insurance plans. If the goal is to go economical with the premium payments, joint term insurance can be chosen, as two different premiums will not have to be paid in this case.

 

Buying joint life insurance not only saves on costs but also saves time and the hassle of maintaining two separate plans. To check premium calculations, you can use term plan calculators online. Tata AIA Life Insurance provides various options for everyone’s insurance needs.

 

L&C/Advt/2021/Jun/1051

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Disclaimer
  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • #Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.