All You Need to Know about Joint Life Insurance

Whether you are a working professional or a householder, it is quite natural for you to worry about the loved ones in your family, especially when you will be no longer around to take care of them. A great way to deal with this is to opt for a life insurance policy. A life insurance policy is a contract between the insurer and the policyholder: the insurer guarantees to provide financial protection to the insured and, in return, the policyholder pays a premium.

Conventionally, life insurance plans were bought by a single policyholder. Nowadays, there are joint life insurance policies as well, which can be bought by two people and provide life coverage to both. The working of joint life insurance differs from that of regular policies, especially when it comes to making claims and receiving the sum assured. Here is all you need to know about joint life insurance. 

What is joint life insurance and how does it work? 

In a regular policy, the policyholder is a single individual. They pay the premiums and are solely covered by the policy. When they pass away, the insurer pays the sum assured amount to the beneficiaries of the policy. 

In a joint life insurance policy, instead of a single policyholder, there are dual policyholders. Usually, these plans are opted for by married couples so that their family receives complete coverage. The premium is paid by both the insured members. With most policies, the sum assured is divided between the two members. The amount may be distributed equally or in varying percentages. 

When either of the insured members passes away under conditions mentioned in the policy, the other surviving member receives the sum assured amount reserved for the policyholder. However, in most cases, this does not mean that the policy expires. The other member continues to receive the coverage. If they pass away as well in a manner covered by the policy, the beneficiaries receive the remaining sum assured amount once more. 

If both the insured members pass away at once, the beneficiaries receive the entire sum assured amount. 

Features and benefits of a joint life insurance policy 

• Premium is cost-effective for two persons 

The premium for a joint life policy may seem to be high as compared to a regular policy. However, one must remember that two people are being covered here. The joint coverage is bound to hike the premiums to a certain extent. Regardless, the premium for a joint life is usually lower than that of the conjoined premiums of separate individual policies. Thus, if you are seeking coverage for two people, then a joint policy may be a better option.

You can take the help of a life insurance calculator to better understand the differences in the premiums. 

• Acts as an income replacement 

Many joint life policies have a feature wherein the surviving policyholder receives regular pay-outs along with the death benefit amount when the other policyholder passes away. This is especially beneficial for people who are the primary earning members of their family. While the death benefit pay-out is a necessary financial compensation, a regular income source ensures that your loved ones have the financial resources to meet their daily expenses.   

• Provides tax benefits 

The premiums that you pay towards your joint life insurance policy are eligible for tax deductions, as per Section 80C of the Income Tax Act, 1961. This deduction can be stretched to a maximum of Rs 1.5 lakhs. The dual death benefits, too, are exempted from taxation and not considered sources of income. 

Should you buy a joint policy or two separate policies?

Now that you know life insurance meaning and what joint life insurance is, you may be wondering if it is indeed a suitable option for you. 

If you are looking for coverage for two people at an affordable rate, then a joint life insurance policy is a good option for you. But one must remember that the coverage offered is the same, as there is a single insurance contract. If the other policyholder opts for coverage they personally require, then you will have to bear the premiums for the same even if you do not require it. Therefore, one must look at their coverage needs and then choose a policy type accordingly. A life insurance calculator can be very helpful to you in this process, as it gives you an accurate premium estimate.