Buying life insurance is a wise decision to take, especially if you are married. What is life insurance? It is an insurance policy that provides a sum assured to your chosen beneficiaries in the event of an untimely demise of the policyholder. You are expected to pay premiums in return for the life cover. There is a specific type of life insurance for married couples, and that is called a joint life insurance policy. Under this policy, spouses can get life coverage for both under a single premium and plan. This is ideal for families where both the husband and the wife are primary earning members.
If you are wondering which one would be a better fit for you and your spouse – individual life policies or a joint life policy – then this article is for you.
Understanding life insurance vs joint life insurance
When you buy life insurance with yourself as the life insured, the coverage is extended only to you. In the event of your demise, your loved ones get the sum assured. The premium for this kind of policy is decided solely on the risk profile of the single policyholder. A life insurance premium calculator can help you understand the premium aspect of an individual life plan.
Under a joint life insurance policy, the risk profiles of both partners are taken into consideration. Broadly, there are two types of joint life insurance policies:
- First death – The policy covers both persons but ends after the passing away of either of the members. After one death claim is raised, the policy ceases to exist.
- Death of each life – This kind of policy continues coverage with a lowered premium for the remaining member even after one spouse has passed away. Separate sum assured amounts are paid on the passing away of each of the spouses.
Now that you know what life insurance is and what is meant by joint life insurance, let’s look at the factors that can help you decide between both.
When you should take a joint life insurance policy
- When both the spouses have various dependents
In many modern, double-income families, the husband, as well as the wife, have several dependents. Payment of bills, repayment of liabilities, children’s education, and so on, are taken care of by the incomes of both the parents. If the situation is such that the passing away of either of the couple can lead to financial difficulties in the household, then joint life insurance may be the wiser option.
- If you are looking for a more cost-effective life insurance policy
The premium of a joint life policy, usually, is lower than the total premium of two individual life policies. However, this differs on the basis of several factors, such as the tenure chosen, the sum assured opted for, the riders added, and so on.
When you should buy life insurance individually
- If you are looking for the same sum assured for both
In a joint life policy, there is a principal life insured who will generally have the higher portion of the sum assured. For instance, the principal life insured would have 70% of the total sum assured as their life cover, while the other spouse would receive the remaining 30% of the sum assured as their life cover. This usually occurs in situations where the other life insured is a homemaker. So, if you are looking for equal sum assured amounts, then individual policies may be the better option.
- If there is a chance of separation
A separation or divorce is an unpleasant process. You would not want the hassle of handling a joint life insurance policy in this situation. A joint life insurance policy generally cannot be divided. If the premium is not paid consistently by either of the spouses, the coverage may cease. The other spouse would have to take up the responsibility for the premium payments. This situation can be avoided if the spouses were to buy life insurance individually.
It is also recommended to have a clear conversation with your spouse. As a couple, consider your finances, your coverage requirements, your future plans, and so on. Take the help of tools such as the life insurance premium calculator, the human life value calculator, etc. to make the right decision.