When people start earing, they utilise most of their income on household expenses and investments. While investing money will help grow it over time, emergencies can come up without warning, and place a financial toll on people. If something unfortunate were to happen to you, your savings and investments alone may not be able to help your family survive financial instability for long.
One way to maintain a sufficient corpus for your dependents and the next generation is by investing in a life insurance policy. There are different types of policies that you can select from. If you are planning on investing in a policy with your partner, you can consider investing in joint life insurance. What is joint life insurance? How does it benefit you? Read on to know more about it.
Understanding the meaning of life insurance
What is life insurance? Life insurance is a type of policy in which you as the policyholder get into an agreement with your insurer. As per this agreement, the insurer will compensate your loved ones in the event of your sudden demise. The amount of compensation depends on the policy you purchase. This amount can be used by your family to manage regular expenses while setting aside some for the future goals.
What is joint life insurance?
As the name suggests, a joint life insurance policy provides life coverage to two people. It is mostly married couples who usually opt for this policy. As there are children and other dependents who require financial support, it makes more sense to invest in a joint policy. Similarly, if there is just one earning member in the family, the earning individual will look to safeguard their partner and children, if any.
For this insurance policy type, if one of the policyholders suddenly passes away, the joint holder of the policy will receive the compensation amount from the insurer. Consider that a married couple,Mr. Ramesh and Ms. Kavita invested in a joint life insurance policy. After a few years, Ramesh passes away due to a heart attack. Since both Ramesh and Kavita co-own the policy, Kavita will receive the sum assured from the policy. Do keep in mind that with the demise of one of the co-owners of the policy, the policy expires after the sum assured is provided.
What are the types of joint life insurance?
If you and your partner are looking to purchase this type of life insurance, you should know about their types:
- Joint term plan
This type of plan is the same as a normal term plan. The only difference being that it covers two people instead of one. This plan comes with a term which may vary from one insurer to another. If one of the policyholders were to pass away during the term of the plan, the other policyholder will receive a death benefit from the insurer. Once the death benefit is paid to the co-owner, the policy will expire.
- Joint endowment plan
Just like a normal endowment plan that offers the dual benefits of investment and insurance, a joint endowment plan offers the same benefits, but to two individuals. Once the plan expires, the policyholders will be paid with an amount known as ‘endowment’. If one of the co-owners of the plan were to pass away during the term of the plan, the other co-owner will be compensated with the endowment amount. After the demise of one of the co-owners, the premium payment stops automatically. Maturity benefits are also provided in this plan.
Should you invest in this plan?
If you wish to make your partner financially independent after your demise, it makes sense to invest in this plan. The premiums in joint policies are less when compared to individual policies. Some policies have the added benefit of regular fixed income which is provided to the surviving policyholder. The duration of this income can be up to 60 months. There is also the advantage of tax benefits. The premiums are tax-deductible under Section 80C of the Income Tax Act. The death benefit received from the policy is also tax-deductible under Section 10(10D).
If safeguarding the future of your partner and other dependents is your main objective, you should consider investing in this plan. Before opting for this plan, you can use the life insurance premium calculator to see how much the policy would cost you based on your requirement.