Life insurance policies look out for your loved ones in case the worst happens to you. They offer the financial support that your family needs to meet expenses, maintain their standard of living, and meet life goalswhen you are no longer around. Term policy is a popular type of life insurance policy due to the kind of benefits it offers.
A term policy is a type of life insurance policy that offers a large sum assured at an affordable premium. This is because it is a pure protection policy and comes with only a death benefit. This means that in case the policyholder passes away during the policy term, their nominees will receive a payout. However, in case the policyholder survives the term, there is no survival or maturity benefit.
Traditionally, the term plan covered only one member of the family, the breadwinner. However, increasingly now, many families have both spouses who arefinancially contributing to the family. Hence, a joint term insurance plan has been designed by insurance companies to better suit the needs of such families.
Reasons to purchase a joint term plan
Here are some of the benefits that a joint term policy offers which may make it a good option to consider for you and your family:
1. Comprehensive coverage
A joint term policy allows a person to protect their family against the possibility of two devastating events – their death and the death of their spouse. The policy payout is made on first claim basis. This means that the sum assured is paid on the death of whichever of the two policyholders passes away first. Usually, the term policy terminates thereafter.
But you also have the option of choosing a joint term policy that offers two death claims, one for each of the two insured individuals. The nominee in case of joint term plans is the spouse. However, if both the policyholders were to pass away, the payout would be made to their children.
In most cases, buying one joint term insurance plan for both you and your spouse costs less than buying two separate joint term plans. The lower premium burden can amount to a significant amount of savings in the long-term. You can use an online term insurance plan calculator to get an idea about how much a term plan would cost you and your spouse.
There are also certain joint term plans that waive off the premium after the demise of the first spouse while continuing to cover the second spouse. Other than its affordability, joint term plans are also simpler. It’s easier to keep up the premium payment schedule and terms of one policy rather than two different ones.
3. Income replacement
Certain types of term plans offer the benefit of income replacement. Even if one of the breadwinners of the family isn’t around to provide, it can have a significant impact on the finances of the household.
With the income benefit, the surviving spouse receives a monthly payment, in addition to the death payout, for a certain period to help support them financially. Joint term plans also come with a host of other helpful riders that you can choose from such as accidental disability benefit, critical illness rider, and more.
4. Tax benefits
Joint term insurance plans also offer tax benefits under section 80C and section 10(10D) of the Income Tax Act, 1961. Joint term plans are EEE (Exempt Exempt Exempt) in nature. This means that on all three instances – premium payments, income earned, final payout – there is no tax or that there are tax deductions in place.
Do consult your financial advisor or insurance provider to gain clarity on which tax benefits you will be eligible for depending on the tax regime you’re currently following.
A joint term insurance plan is helpful when looking at the long-term financial safety of your family. It’s an affordable option to cover both you and your spouse and secure your children’s future. By figuring out the financial contributions of you and your spouse and mapping out your family’s future financial needs, you can decide on the right sum assured for your joint term policy. You can make use of online term insurance plan calculators to see what the premium would be like and also compare the features of different joint term insurance policies to select the one best suited for your family.