JOINT LIFE INSURANCE POLICY

What is a Joint Life Insurance policy?

A joint life insurance policy provides coverage for two individuals under a single plan. These individuals can be spouses, business partners, family members, or close associates.

The concept of a joint life policy mirrors general life insurance by offering financial protection and paying a death benefit when one of the insured persons passes away. The death benefit can either be a shared amount or a separate sum for each insured individual.

 

 

 

Types of Joint Life Insurance Policy

There are primarily two types of joint term insurance plans, each serving unique purposes based on financial goals and requirements:

1️. First-to-Die Joint Life Insurance

• In this policy, the second person receives the death benefit when the first insured person passes away.
• Once the benefit is paid, the policy terminates.
• Ideal for:
  • Newly married couples
  • Business partners
  • Paying off shared loans or ensuring business continuity

Example:
Mina and Mayur purchase a First-to-Die Joint Life Insurance policy with ₹30 lakhs coverage for 15 years. If Mina passes away in the 7th year, Mayur receives ₹30 lakhs, and the policy ends.

 

2️. Second-to-Die Joint Life Insurance

• Also known as Survivorship Life Insurance, this policy provides a death benefit only after both insured individuals pass away.
• Often used for long-term estate planning, covering taxes, or providing financial security to children.
• Features lower premiums compared to First-to-Die policies.

Example:
Ram and Sneha procure a Second-to-Die Joint Life Insurance policy with ₹60 lakhs coverage. After both parents pass away, the amount is paid to their son Aarav to manage estate taxes and inheritance.

 

How Does Joint Life Policy Work?

The policy works with its two structured types as First-to-die Joint Life Insurance and Second-to-die Joint Life Insurance. Let’s explore this with an example that illustrates it’s working.

How First-to-die Joint Life Insurance Works?

Mina and Mayur are a married couple, who complete the purchase for First-to-die Joint Life Insurance policy with a death coverage of Rs. 30 lakhs for 15 years and it’s a shared policy. In between, if Mina departs this life due to health issues in the 7th year of the policy, then Mayur can receive the sum assured of Rs. 30 lakhs, after which the policy ends leaving Mayur without insurance under this specific policy.

In such a situation, Mayur can continue to pay premiums with a new individual policy. But, he has to do that according to the current rates and potentially with different underwriting conditions.

How Second-To-Die Joint Life Insurance Works?

One can take advantage of joint life insurance policy with separate coverage amount or shared death benefit. In this case, the cover amount for the second person can be equal to the first person’s cover amount, either 50% of it, or 25% of it.

• If the first person passes away, their cover amount is paid to his partner.
• If a second person passes away afterwards, then their cover amount is paid to the policy’s nominee.

For example, Ram and Sneha procure a joint term plan for 35 years of timespan, with coverage amount of Rs. 60 lakhs for separate sum assured and the couple introduced their son Aarav as a nominee. According to the policy terms and schedule, Sneha could get 25% of Ram’s investment, which is Rs. 15 lakhs. 

Let’s assume that if Ram said goodbye to the universe in the 25th year of the policy, then the amount of Rs. 60lakhs will be paid to the surviving spouse Sneha. If Sneha left this world due to an accident during the 30th year of the policy, then the policy amount of Rs. 15 lakhs will be transferred to the Aarav’s account who is their nominee.

 

Benefits of Joint Life Insurance

A joint term insurance plan offers several advantages, making it a popular choice for couples and business partners. Here are the key benefits.

Cost Effective

The joint term insurance plan has cheaper premium rates than purchasing two separate individual policies. The combined risk under one policy permit to reduce costs, and makes it a more affordable option.

Simplified Administration: A joint life insurance plan has straightforward buying procedure due to less paperwork. You won’t need to track multiple police for each person which reduces administrative hassle.

Flexible

Joint life Insurance policies provide customizable coverage for critical illness, accidental death, or waiver of premium that suit specific needs. All these options improve the policy’s flexibility. Apart from this, you can get immediate monetary support for surviving spouses or long term estate planning.

Reduced Estate Tax

For couples with significant assets, joint life insurance can help to cover estate taxes. Also, it ensures their children receive a lump sum after both the individuals pass away.

 

Who Should Consider Buying Joint Life Insurance

Everyone cannot buy a Joint Life Insurance policy plan. But it can be a superior selection for-

• Married Couples with shared financial responsibilities like loans.
• Business partners who depend on each other for their commercial success and its continuity.
• Families who focused on estate planning and conveying their financial legacy for their children or grandchildren.
• Newlyweds who have tight budget
• Retired or older couples who do not require any immediate financial dependents. 

 

Joint Life Insurance-FAQs

What is the difference between joint life insurance and individual life insurance?

You can find multiple differences between the two policy plans. But mainly, the Joint life insurance policy cost more than buying two individual policies.

What are the claim settlement rules for joint life insurance policies?

Claim settlement rules for joint life insurance policies may change by insurer. But, it can include nominee receive claim, premium waiver, separate claims, mandatory documents, etc.

Which Type of Joint Life Policy is Better?

Well, selection of the better type of policy is actually based on your particular needs, goals, and circumstances. But, the First-Death Joint Life Policy is recommended as the better one for your partner.

What Happens to Joint Life Insurance after Divorce?

Both the individuals can keep the policy active if they share common financial responsibilities such as supporting children or repaying a mortgage. 

Can unmarried partners opt for joint life insurance?

Yes, unmarried partners can opt for the joint life insurance in many cases, although the availability and specific terms may change by insurer and region.

Which is better: first-to-die or second-to-die joint life insurance?

Both the policy types have different roles. It depends on your specifications. First-to-die is better for your partner and Second-to-die is better for your children.

Is joint life insurance suitable for business partners?

Yes, it is highly suitable for business partners, as it helps to protect the financial stability of the business if any of the partners passes away.