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Should I opt for Two Separate Term Plans or One Joint Term Plan?

We have spoken about how a Term Insurance Plan is a must-have. But many times the question arises as to which is a better investment option for coverage – A Joint Term plan or Two single Term plans?

Also Read: Term Plan- The best gift for your family

A single term insurance plan, when bought separately, is just another form of term insurance which offers you exhaustive life coverage for a certain period of time. Should the policyholder come to face the unexpected that life has to offer during this period, their nominee will receive the guaranteed benefit. In any case, a term insurance plan provides an assured lump sum amount (as per the terms of the plan) at a premium rate which is quite affordable

Joint term insurance, on the other hand, is not for individuals but rather for married couples. Here, the sum assured is paid out when any one of the two policyholders passes away or after the expiration of the policy tenure lapses. Should both the insured persons pass away, the children or those nominated receive the claim amount as per the policy terms.

So, if you’re starting a family or already have one, the conundrum is to select between these two equally viable plans!

Which one should you choose?

As with all insurance policies, there’s no one-size-fits-all approach that will cater to everyone’s requirements. It is important to keep in mind that different individuals or families have different needs - they will make a decision that accords to their own ideas, aspirations, and standards of living. Keeping that in mind, here’s our attempt to giving concrete directions as to the paths that can be taken!

  1. Two separate term plans can be customized to the will of the individual policyholders. A joint term plan, on the other hand, will have the same conditions. You can say it is easier to track than two separate plans, but then again it depends on how you want to go about it.
  2. The coverage period will also differ in both these scenarios. For example, you are 35 years of age and your wife is 33. If you decide to take individual term plans, and the coverage chosen is till you turn 60, you will get a cover for 25 years from then whereas your wife will be covered for 27 years from then. In case of a joint plan however, you both will be covered for the same number of years and not two different coverage periods. 
  3. A joint term plan has only one lump sum payout, even if both policyholders face their demise, while two separate term plans will provide two different payouts.
  4. Depending on the specific policy, a joint term plan may also offer additional benefits that two different term plans will not. For example, in the case of unforeseen demise of one of the spouses, certain plans offer a sustained stream of income to the partner for as long as policy tenure continues. This regular income is paid on top of the death benefit which the partner receives. Certain policies also provide an accidental death benefit rider should there be an accident which results in the insured person’s unfortunate passing away. Again, this is paid in addition to the death benefit.
  5. In both these options, the premium, as well as the death benefit, are exempted from tax deductions under section 80C and 10(10D) of the Income Tax act. With this, both Joint and well as two separate Terms are lucrative for those looking for tax saving. (Tax Laws are subject to change)

Key Takeaway:

As we said, these are the observable contrasts between what you’ll find if you opt for two-term plans or one joint term plan. So, in the end, it’ll be up to you and your family’s needs to decide which one will be the option to go for. It’s always best to understand the benefits offered by the two and how they will be best suited in your case and make the investment decision accordingly!

Dec 22/18

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