My wife and I are in early 30's with a newborn kid. We earn about Rs 25 lakh annually and have a debt of Rs 80 lakh. We have an employer provided insurance cover of Rs 20 lakh each. Besides this, I have a term insurance of Rs 75 lakh. Are there any joint life term insurance policies in the market?
-Subramanian
A term insurance policy is necessary for anyone who is a bread earner of the family. And in your case, where both the husband and wife are working, it becomes doubly important to be insured. In case anything untoward happened to either of you, the family's income would be affected.
Two types of joint life policies are available in the market.
There are policies that provide cover on a first-claim basis. These plans pay sum insured in the event of first death and cease thereafter leaving the other person uninsured.
Then, there are plans that pay sum assured on death of each insured life. After paying the death claim of one partner, the policy continues to cover the surviving person with a reduced premium rate. The reduction in premium will depend on age, lifestyle, policy term, premium payment frequency and sum assured of the surviving partner.
You need to assess the needs of your dependents before selecting a policy. Policies that offer protection only on first death will cost less, but these policies leave the surviving partner uninsured, which could adversely affect the dependants.
HDFC Term Assurance plan pays claims on first-death basis while Bajaj Allianz iSecure pays the claim on each death. Some insurers offer joint life endowment policies, but you should stay away from them, and look for pure term policies. An endowment policy would charge a huge premium for coverage that can cost much less with a term policy.
This article was originally published on January 13, 2014.
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