Opt for joint life policy to secure future

Helps save premium but maturity benefits lower than individual policies.

Insurance options for a couple need not be restricted to taking separate covers. A joint life insurance policy, that covers both the partners through a single endowment plan can also be considered.

When Rakesh Mehta (35) and his wife (30) recently took a Rs 30 lakh loan for their dream home, the bank insisted they buy an insurance term plan. By doing this, the bank would get the sum assured in case any of them passes away. For the surviving spouse, it ensures paying off debts without liquidating other investments or assets.
 

Particulars	Joint life	Individual  Endowment*
Husband’s age (yrs)	35	35
Wife’s age (yrs)	30	30
Policy tenure (yrs)	25	25
Risk cover (Rs/lakh)	60	60 (30+30)
Maturity benefit (Rs/lakh)	30 + bonus	60 + bonus
Annual Premium (Rs)	148,957	2,31,857
	(1,18,402+1,13,455)
*Individual Rs 30 lakh policies for a 25-year tenure

Since the couple was employed, they planned to share the total equated monthly instalment (EMI) outgo. Taking separate term plans of Rs 30 lakh each was an option but they opted for a joint life insurance policy.

Presently, only Life Insurance Corporation (LIC) sells such a policy. Some banks, too, offer cover under a group policy that their insurance partners underwrite exclusively for the lender. But the premium is to be paid in lump sum and provides cover only to the extent of the outstanding loan.

In case the spouse is a housewife, her insurance cover will depend on her financial standing.Premiums can be paid by either of the partners.

BENEFITS
The joint life plan waives off the future premiums and the survivor gets the sum assured immediately on the death of the partner.The plan also has an accident and total disability benefit as a built-in feature.

If the surviving partner is alive through the policy term, he or she will also gets the bonus accrued along with the sum assured. In case, both pass away, the nominee would get both the lump sum and bonus.

In Mehta's case, death of either of them, will mean the surviving spouse will get a risk cover of Rs 30 lakh. The bonus amount will continue to accrue in the policy.

COSTS
Joint life plans work out cheaper if you compare the premium paid for them vis-a-vis individual endowment plans. The Mehta's will pay Rs 1,48,957 as annual premium. Had they opted for individual endowment plans of Rs 30 lakh each, they would have paid a combined annual premium of Rs 2,31,857. However, if the policy matures, the surviving partner (or both), will get only Rs 30 lakh and the accrued bonus in a joint life plan. In an endowment plan, it would be Rs 60 lakh plus bonus.

CORPUS FOR FUTURE
If both partners survive till maturity, the amount can be used to buy an immediate annuity plan. This is also how the Mehta’s have planned to add to their retirement corpus.

Even surviving partners could use the same strategy. While there is no burden of paying the premiums, the risk cover shall continue.

But a line of caution here. Before taking a joint life policy, ensure that your relations with your spouse are stable, with no indications of a possible separation. Considering it defeats the very purpose of this policy.

The taxation in this plan is similar to other life insurance products. The proposer of the plan gets a deduction in his taxable income under Section 80C and any claims or maturity arising out of the plan comes tax free u/s 10 10(D).

The writer is director, Bharat Parekh Financial & Insurance Services