Should you go for a joint life cover?

While it is handy in the case of a non-earning spouse, it is not cost-effective

Conventionally, life insurance policies are meant to cover the life of the primary breadwinner of the family. But the trend is fast changing with the rapid rise in the number of working couples, driving the need for a life cover for the spouse too.

You could take separate policies for you and your spouse. But a few insurance companies offer joint life insurance policies. Much like regular life insurance policies, you pay a premium for a fixed period, during which time you can claim for the life cover in case either one of you dies.

Are these policies worth the while? Are they more cost-effective? We look at the various pros and cons of joint life policies.

Essentially, joint life insurance policies cover you and your spouse under one contract. Normally, these come as an additional option with your plain vanilla term policy. Under this option, your life (primary life insured) and your spouse’s life (secondary) can be covered under the same policy.

What they offer?

AEGON, PNB MetLife and the recently launched Aditya Birla Sun Life Insurance’s Life Shield Plan offer this feature.

Under PNB MetLife Mera Tera Plan and Aditya Birla Sun Life Insurance’s Life Shield Plan, on death of the primary insured before the spouse (secondary life insured), the sum assured will be paid to the spouse and her life cover will continue with future premiums waived off. On death of the second life insured thereafter, the sum assured in respect of the second life is paid to the nominee and the policy is terminated.

In case of death of the second insured first, the sum assured will be paid to the primary insured and the future premiums will be reduced to what would have been charged at inception for only the primary insured (base premium).

In case of death of the both lives simultaneously, the death sum assured in respect of both the first life and the second life will be paid and the policy is terminated.

Both PNB MetLife and Aditya Birla Sun Life offer the joint life cover feature only if the sum assured of the primary/first life is greater than or equal to ₹50 lakh. The sum assured for the spouse/second life will be 50 per cent of the sum assured of the primary insured.

Pros and cons

A key benefit from joint life policies is that if the primary insured dies, the surviving spouse not only receives the sum assured but also does not have to pay future premiums to keep her cover alive.

It is particularly a good option if your spouse is not earning any income.

Life Shield offers a cover of 50 per cent of your sum assured to your spouse, irrespective of the occupation (even housewife).

However PNB Met Life restricts the cover for spouse to 25 per cent of sum assured if she is a housewife. Nonetheless, covering a lower-earning or non-earning member is the one of the key advantages of taking a joint life cover. However, if the spouse earns well and is capable of managing finances, then the joint life covers may not be that cost-effective.

Under PNB MetLife Mera Tera, for a 35-year old male, non-smoker, a cover of ₹1 crore for a 20-year policy term works out to an annual premium of ₹9,711 (inclusive of taxes).

The additional premium for your spouse, for ₹50 lakh cover (30-year old) working professional. comes to ₹5,326.

If both decide to a take separate policies, then for a 30-year-old female, a ₹50 lakh cover works out to an annual premium of ₹4,248 under PNB MetLife.

Hence, the higher premium (₹5,326) that you pay for a joint life cover and the waiver of premium benefit (on death of the primary insured) may not make much sense.

Being an offline policy, the base premium for Aditya Birla Sun Life Insurance’s Life Shield Plan is higher.

For a 35-year-old male, non-smoker, a cover of ₹1 crore for a 20-year policy term works out to an annual premium of ₹11,074 (inclusive of GST).

However, the spouse gets a 10 per cent discount on the premium.

Hence, the additional premium for the 30-year-old spouse under joint life cover works out to ₹3,883.

Therefore, look at the cost and features of each joint life cover before deciding.

A key drawback of a joint life cover is that in case of divorce or separation, if one partner decides not to pay his/her share of the premium, the burden will fall on the other or the policy could cease. Having separate policies also gives you more flexibility on the cover and other features.

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