Insurance
•02 min read
Welcome to our brand-new series, A-Zs of Insurance. In this series, we will venture into the world of insurance to breakdown insurance jargon for you, so you’re empowered to make informed decisions about your financial security.
As more urban millennials and Gen Zs join the workforce, finances become an important part of the household and relationship. Many nuclear families are becoming double income households to achieve better financial growth.
With an uptick in double income homes, financial interdependency between spouses has risen too. Both partners contribute to household expenses, savings, loan applications, future dreams; making it extremely important to create a financial safety net for each of them, should the unexpected happen.
While traditional term life insurance offers financial security, there’s a unique option for couples or people who depend on each other financially: joint term life insurance.
Let’s understand what this means.
A joint term life policy covers two people, typically spouses, under one term insurance plan. It is crafted to provide financial protection to either member if their co-insured passes away.
It’s a good option to have if both people have shared financial obligations like a joint home loan or if they have dependent children, so the surviving spouse has a financial safety net to take care of their needs.
Let’s understand this with an example. Aman and Reena are married and have taken a home loan of Rs 30 lakhs for their new apartment. They also have an 18-year-old daughter, Kiara, who has been appointed as the nominee. Both spouses contribute to the household and decide to get a joint term insurance policy in 2024 with a cover of Rs 1 crore to ensure holistic financial security for the entire family.
They can choose from two claim payout options while buying the policy:
If either spouse passes away when the policy is in force, the surviving spouse gets the payout and the policy ends.
Let’s imagine Aman passes away due to an unfortunate accident in the next 10 years. Reena will get the payout of Rs 1 crore, and the policy will terminate.
Both spouses will have different coverages; Spouse A will have 100% coverage, while Spouse B will have 100%, 50%, etc.
For instance, let’s say Reena has 100% coverage while Aman has 50% coverage.
If Reena passes away, Aman will get a payout of Rs 1 crore.
Further, let’s imagine Aman passes away after Reena. Here, Kiara, as the nominee, will get a payout of Rs 50 lakhs.
Here are a few reasons why a joint term life policy is a good choice:
1. Financial protection
The policy offers ample coverage for both you and your spouse, ensuring financial stability no matter what life brings.
2. Low premium
Joint term life policies typically come with a lower premium as compared to buying two separate term policies for you and your spouse.
3. Easy to manage
Since a single policy covers you and your spouse, it becomes easier to manage. You don’t have to go through multiple buying processes, documentation, underwriting, premium payments, etc.
4. Tax benefits
Joint term life policies offer tax benefits on both the premium and payout under Sections 80C and 10(10D) of the Income Tax Act.
