The traditional, life insurance covered the primary breadwinner. But, the increase in the number of couples that are in gainful employment necessitated for cover for couples. This is where a joint life insurance cover was developed.
It is a life insurance cover that is underwritten on two lives of people who are mostly spouses. The policy is designed in a way that it covers a couple so that they receive benefits if one of them dies.
It allows them to choose a policy of their choice and make a single payment every month. It comes in both term and permanent policy depending on the couple’s needs.
The policy is ideal for a couple with good overall health levels. If one of the couples smokes or is of ill health, the premiums for the cover may be high. Also, the cover is cost-effective and can help the couple save on underwriting costs. In most cases, they only need to file a single policy for the two people.
Features of Joint Life Insurance
- Some covers pay the sum assured upon the demise of any of the couple and the policy is terminated. But in some cases, payment is made upon the death of all the partners that are the joint policyholder.
- Other policies provide additional benefits such as paying income to the remaining spouse. The payment may be made for about 60 months.
- If the death is caused by an accident, some policies pay an extra amount alongside the death benefit.
- A few plans allow the insured to add a sickness insurance rider to its base policy
Types of Joint Life Insurance Policies
First-to-die
It protects the heirs by paying out the benefits to the remaining spouse. It ensures that they live a normally life even in the absence of their spouse. A first-to-die cover is costlier compared to taking a single life policy.
But, it is cheaper than taking two different policies. It is a great way of protecting people operating on a tight budget.
Second-to-die
The policy is only cashed after the two spouses die. It is intended to protect the surviving beneficiaries left behind by the dead couple. It is a good plan that can help the heirs to pay out estate taxes with ease.
This ensures that the valuable asset remains in the hands of the family. The policy takes long to pay-out since the two parties must die. So, the surviving spouse may not access money to use after the other spouse dies. If the two parents die, the children will access the benefits.
Why Couples Need Joint Life Policy?
The cover is important in modern times which is dominated by double income nuclear families. It is a good cover for spouses that contribute to supporting the family. The cover intends to protect the surviving couple from financial difficulties.
It is a good cover for a young couple with kids and outstanding loans. Upon the death of any of the couple, the surviving spouse receives a significant amount of money.
Normally the money is more than what was originally invested in the cover. The money is significant and can help to lessen the burden of taking care of children.
Pros and Cons of Joint Policy
Pros:
- The monthly premiums are affordable.
- It is easier to apply and manage the policy.
- It protects the beneficiaries from financial difficulties following the death of the spouse.
Cons:
- The couple could be forced to pay much higher premiums if one of the spouses has poor health.
- If the couple chooses the second-to-die type, the beneficiaries must wait for the second spouse to die. They can only claim the benefits after the death of the surviving spouse.
- In the case of the first-to-die plan, once one spouse dies, the contract is terminated. The remaining spouse is left without a cover.
- In the case of divorce, it can sometimes get complicated. The exes may be forced to cancel the plan or agree on how they should manage it.
- If the insured outlives the policy, the beneficiaries may not receive the payment.
- One of the biggest problems with the joint policy is that once you have signed it up, there is a binding contract. You will not recover your money in the event you opt-out of the policy.
How A Joint Cover Compares to Taking Out a Single Life Insurance?
Buying another cover- in the case of a joint life cover, the pay-out is made immediately one of the spouse dies. It means that the surviving partner will no longer be covered after the payments.
The price – the joint policy is cheaper than separate policies. However, in some cases, the difference in pricing may be small and negligible. So, there is always a need to compare the options before settling on one. Also, separate policies offer extra protection which is a good thing.
Flexibility- when you take out two separate policies, you pay different amounts of money to cover each of your life. The breadwinner may pay higher premiums compared to the partner who takes care of the home.
Thus, each one of them enjoys their cover even when they separate or divorce. But for joint coverage, issues may arise when the couple separates. The insurer is unlikely to split or separate the cover.
It means that each of the party may need to arrange for a new cover. It implies that they must start from scratch after separation. Also, it is more expensive if more time has passed or one of the couples has suffered from a major health problem.
Reduced tax bill- it is possible to write a joint life policy in trust. In such a case, the benefits will be paid to beneficiaries tax-free. And you can set up a trust by simply talking to your insurer.
Important Things to Note On
- It does not matter which member dies first. The cover will pay the surviving partner the entire benefits.
- The joint cover policy is cheaper than an individual cover. It is thus, suitable for young couples interested in saving some cash on premiums.
- A joint cover offers more protection. It covers even the spouse that stays at home taking care of the children. The cover ensures that in the event of death, the surviving working partner has enough money to pay a caretaker.
- If you want to pay less, taking a joint policy will allow you to enjoy a double cover at a lesser cost.
- A joint cover insures the spouses on similar terms and conditions. This is not the case when separate policies are taken. In a case of separate policies, each spouse is insured as per their individual needs.
- Only one pay-out is made on the death of any of the spouses or both. So a joint insurance policy bars out claims on the death of each spouse.
- If the couple perishes in an accident in a joint plan, the beneficiaries receive a single payment. But, if they had individual policies, they would receive two separate pay-outs. Individual policies are better. They recognize the financial and emotional impact on children who lose both parents.
- Once the single pay-out plan is effected in a joint cover, it leaves the surviving spouse without a cover.
- Covering the couple at one go requires a single document. Also, it is easier to manage the policy.
- The benefits received on the death of either of the insured is greater than what they would get in term plans.
- Joint life policy offers greater value to anyone who is in middle age (40-50 years) compared to term plans.
- In some joint plan policies, how old the couple is and their lifestyle are important considerations. They are relied on when calculating the premium to be paid. But, in some policies, only the age of the eldest spouse is considered.
- The policy could be jointly owned. It means that one can only make changes on the contract with the consent of the other partner. It ensures that the interest of the two insured is protected. It also ensures equal representation in policy decisions.
Conclusion
The best way to protect your loved ones from economic hardships when you die is by buying a life insurance policy. If you are married and you both feel it is time to take a life insurance cover, a joint policy cover could be the best for you.
The cover ensures that the surviving couple is cushioned when the partner dies. It also ensures that beneficiaries receive some benefits when their parents die.
