You must be familiar with the concept of joint bank accounts where married couples, parents and children or business partners own a single bank account in their names. Similarly, there is a concept of joint application in case of loans where two or more individuals can apply for a single loan. In the life insurance context, there is a concept of joint life insurance plans. Many of your customers are unaware about these plans and so joint life plans are not very popular. Moreover, your clients also don’t understand the relevance of such plans and don’t choose it. What about you? Do you, as an insurance distributor, know what joint life plans are and when they suit your clients’ needs?
What are joint life insurance plans?
Joint life insurance plans are those which allow two or more individuals to be covered under the same plan. Married couples or partners in a business can buy a single life insurance policy covering them. In case of married couples, both the husband and the wife are covered under a single plan and in case of business partners, all partners in the business are covered under the plan.
Advantages and drawbacks of such plans
When talking about joint life plans, you would find the following advantages and disadvantages relevant to the plan–
Advantages
- Since the plan covers two or more individuals under the same plan, it proves cheaper than insuring each individual separately
- If anyone of the covered members dies, the premium is waived off but the plan continues for the other member
- The plan provides umbrella coverage for the married couple and business partners. Moreover, only one plan needs to be serviced by reducing the hassles of servicing multiple life insurance plans
Disadvantages
- The sum assured remains the same for each covered member. In the case of married couples, if one spouse is non-earning, his/her coverage need would not be as high as the need of the earning spouse. Similarly, in case of partners, one partner might contribute a higher capital that the other partner and thus have a higher sum assured need. Joint life plans do not provide different sum assured levels suiting different covered members. As such, the scope of joint life plans is limiting.
- The policy continues even when the relationship ends. For instance, in the case of a married couple, the policy would not stop if the couple is divorced or separated. Similarly, in case of partners covered under the plan, even if the partnership business is dissolved the policy would continue. As such, it is difficult to ascertain which of the covered individual would continue paying the premiums. So, joint life plans do not make sense in case the relationship ends during the term of the plan.
For whom is the plan suitable?
Joint life insurance plans have a limited scope as they can be taken by married couple and business partners only. Even in such cases, the plan is suitable for those couples who would not consider separating or divorce during the term of the plan. Moreover, if one of the spouses is non-working, the plan makes sense. If, however, both the spouses are working, independent plans should be considered.
In the case of partners, if the business is supposed to be run for a long time, joint life plans are a good option. Moreover, if all the partners contribute the same capital, a joint life plan can be bought with a uniform sum assured.
How should you pitch joint life insurance plan?
The insurance market usually offers joint life insurance policies for married couples only. Such plans are not available for business partners. So, when selling joint life plans to your married clients, understand the client’s insurance requirements first. If both the spouses are working, it is better to offer them independent plans so that their individual insurance needs can be fulfilled. Moreover, each spouse could also claim tax relief on their respective premiums paid. If, on the other hand, if only one partner is working, a joint life plan would be suitable as the insurance need of the non-earning spouse would also be met with the plan.
So, always understand the needs of your clients and then suggest a suitable solution to match their needs.
