Joint Life Insurance Policies

Joint Life Insurance Policies

Joint life insurance policy provides a single cover for 2 or more persons with one premium. Much like a life insurance policy for an individual, it provides benefit to the surviving policy holder in the event of death of the other holder/s of the joint life policy and can be term or whole life policy. Joint life policy is suitable for working couples and for business partners as one joint policy will cost less than purchasing two separate policies.

The most commonly opted for plan under joint life insurance policies is Joint ‘first to die’ policy. In this, at the death of one partner, the insured amount is paid to the surviving partner after which the policy ceases to be in force. It aims at providing support to the surviving partner to continue meeting expenses such as mortgage payments, car loan instalment etc.

in the event of death of the other partner. Joint ‘first death’ policy can be considered where both of the couple are earning and the main concern is to take care of only the surviving partner and there are no other dependants. The policy is underwritten by calculating the average age of the partners and should be taken according to larger of the two incomes. This joint policy can also be taken by business partners.

In case the requirement is to provide for dependants after the death of both earners, a Joint Survivorship Insurance policy also called ‘second to die’ insurance policy may be taken.  Here, benefit will be paid to the nominated beneficiary, generally the children of the insured, upon the death of both the holders of a joint policy.

This type of policy is normally considered when the need is to provide financial security to one’s heirs or to ensure passing on of business to the legal successors after the death of all founding partners. Survivorship joint life policy is typically a whole life policy.

Pros of a Joint life insurance policy:

a. It is less expensive than taking two separate policies.

b. Underwriting terms for a joint life policy are more flexible because they must adjust two different requirements and the risk is spread over more than one individual.

c. It presents an option for a person whose individual insurance policy would be too expensive due to old age or poor health provided that the other partner is in his/ her prime of health and age.

d. Effective financial planning tool in case of large estate.

Cons of a Joint life insurance policy:

a. A chance of a fall out between the joint holders for e.g. divorce.

b. In the ‘first death’ insurance plan the policy ceases after the death of one partner and at that time if the surviving partner requires an insurance cover it may be too expensive due too old age etc.

c. Single policies are more customised to suit unique needs of an individual than a joint insurance policy.

A joint life insurance policy can be considered primarily by partners especially married working couples as it provides the same coverage to both at a lesser cost than of separate policies while giving them peace of mind of financial security in case of  an unfortunate occurrence.

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