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Best life insurance for couples: What makes it a wise decision?

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Many life insurance providers created the recent trend of introducing joint policies of life insurance meant for couples. The logic behinds it all being that purchasing one policy for both the partners is much cheaper than two policies.

Whereas the usual online life insurance policies mention specific nominee/beneficiary, in Joint Life Insurance, both of partners are taken to be owners and beneficiaries together. If something harmful happens to any one of the two, the other partner becomes the recipient of the benefit of the life cover.

The following section provides you with the original value lying in purchasing joint life insurance policies meant for couples, complete with its pros and cons.

Life Insurance Policies for Couples: There are two types of life insurance policies for couples:

1. Plans Involving Joint Term: In this case, two lives get insured instead of one as in case of a regular term life insurance. Both of the partners pay one premium for a decided term. In the case of the passage of one partner, the survivor can claim the amount of life cover, which expires afterward. Some of these policies to have a certain limit on the cover claim.

2. Plans Involving Joint Endowment: Such a policy involving endowment tends to have an angle of investment. Just like term plans, the validity lasts for a certain time, generally until the retirement of the policyholder. Afterward, the concerned insurance company provides the policyholder with some amount of money, known as the ‘endowment.’

Such life insurance involving joint policyholders, assures that the couple gets a fixed sum when the policy expires. This angle works even when a partner dies; then the survivor receives the insured cover, as well as the endowment at the end of the maturity of the decision period. Premium payments regarding such kinds of joint life insurance do not go on after one of the partner’s death.

Key Reasons Why We Should Consider Joint Life Insurance Policies

Couples generally consider purchasing joint life insurance policies because of the waivers on premium value, which can prove to be cost-effective for a longer period. If a partner dies, the surviving partner can receive the entirety of the sum assured in the cover of the primary policyholder. Moreover, s/he will not need to pay for the future premiums for the upkeep of his/her cover for this kind of joint life insurance.

Let us clarify this with an example. In the case of a couple where the husband is aged 36, and the wife is aged 35, they can decide between the various types of life insurance plans regarding joint life insurance policies.

The sum assured for such policies can range between INR 50 lac to INR 25 lac for each of the policyholders. If the husband suffers a prior demise, the widow will then receive the sum assured for the husband, which in this case is taken to be INR 50 lac. Also, her life insurance cover, which in this case is INR 25 lac, will keep continuing, without payment of the premiums.

As a variation of this kind of policy, the surviving spouse may choose between receiving an assured lump sum and the monthly sum for ten years. But in the case of the spouse’s demise, and not of the main policyholder’s, the policy keeps continuing the same way with the latter having to pay the same premium. Some online policies need policyholders to undergo health check-ups on a regular basis, depending upon the insured sum.

In The Case of a Nominee: If a couple purchasing one joint life insurance plan decides the nominee to be their child, the above mentioned ‘regular income’ characteristic helps the child in the event of their parent(s)’ demise. The child then receives either a fixed lump sum or regular monthly sum, which may help to fund his/her education or separate financial needs.

It is sensible for couples to decide on joint life insurance plans after assessing their life scenario. To illustrate, a couple has taken a joint home loan may find it easier to manage a single joint insurance policy and keep the heir(s) protected from the liability.

A Useful Alternative to This Scenario: Financial planners tend to break down the different requirements of their life insurance clients concerning their different stages of life, likewise purchasing multiple different covers of varying tenures during different times across the lifespan of the clients.

This results in flexibility and inexpensiveness in comparison to buying one large joint life insurance. Judging required convenience and utility of joint life insurance policy; it often makes sense to divide insurance requirements within regular term plans and joint life insurance policies.

Some Suggested Combinations for Couples Regarding Separate or Joint Term Life Insurance:

Nuclear Families of Double Income Nature: Nuclear families where both spouse work and share household expenses may opt for either joint term insurance or separate ones. Expert advice would say that doing so is a must to provide cover for dependants, and the assured sum ought to be 10x the total annual income.

Life Cover: Securing both the partners lives with proper policies rules out future uncertainty.

Requirements in Future Situations: After marriage, many financial requirements for house renovation, educational fees, etc. arise at different junctures of life. There should be enough savings to cater to such needs.

Health Issues: Increasing age entails deterioration of health of both the partners. Opting for critical rider benefit is a smart choice in case of term insurance plans in case of any health contingencies.

Ideal Types of Couple Term Insurance Policies:

  1. Term insurance policy that deals with a single life
  2. Term insurance policy that deals with joint life.

Benefits for Term Insurance Policies: Separate V/s Joint

The differences regarding joint and separate term insurance policies are listed as follows:

1. Terms & Conditions:  If any couple opts for separate policies, the involved cost, terms, and conditions of them can be decided by each of the policyholders regarding his/her specific needs.

2. First Death: While some joint plans give out payment depending by first-claim or first-death, some other joint plans give out payment of the first-claim assured sum upon the death of each policyholder.

One Single/Two Separate Payouts: In the case of joint policies, if the insured couple dies together in an accident, the nominee(s) receive one death-payment. In the case of individual policies, the nominee(s) receive separate payouts.

4. The Case of Divorce or Separation: In case of a divorce between the couple, joint insurance policies cannot get divided between the two if one partner ceases to pay the premium. Under such a circumstance the policy ceases. For the divorced couple’s insurance policies to become separate, they will need to give up on the joint term life plan they had purchased.

Otherwise, they need to wait until it lapses and then buy fresh covers. These, because of progressed time tend to carry the burden of a higher premium. In the case of endowment policies, divorce necessitates premature liquidation. This leads to low returns and subsequent loss of the life cover embedded. Experts suggest that it is practical for a couple to have two separate policies, under the possibility of a divorce.

  1. Affordability: In most cases, joint term life insurance policies are cheaper in comparison to two separate policies for couples. Now there are several catches. There is not much sense in purchasing joint covers for a homemaker since the whole point is to replace the second policyholder’s income for the benefit of the dependent.

Also, if the surviving spouse has a good salary and can maintain family requirements, there’s not much sense to paying a high premium every year to avail of the benefit of premium waiver. Also, the savings is not very huge. To save around INR 700 to INR 1,000 each year, the couple loses flexibility and keeps being locked within the policy for about two decades. In the case of one of them discontinuing the policy, the other one still has to pay the same premium.

6. Convenience: Joint Life Insurance Policy Covers mean less paperwork for each of the couple. Most couples choose joint term life insurance policies due to easy handling of the documentation. Both of the partners can make do with their terms and conditions of coverage in the required documents in one go.

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