Insurance is one of the first investments you should make once you start earning. Traditionally, term insurance has been in the name of the earning member of the family, usu. the husband, with the wife being the primary nominee.
The reason for such discrimination had been purely technical. Term insurance cover is based on the human life value (HLV) of the insured person. If you have an income, estimating your HLV is easy and straightforward. Therefore, insurers had avoided offering insurance to non-earning spouses, which generally happened to be the wife.
What is Human Life Value (HLV)?
Human life value refers to the financial value of a person in present terms. Your HLV will consider the following two factors:
- Your current annual income
- Your current age (retirement age is taken at 60)
HLV is the present value of your income you can earn within the span of your working life. As per this definition, however, if you do not have an income your HLV is zero. This is why a homemaker spouse may find it difficult to secure term life cover.
Can a Homemaker Have Human Life Value?
Homemakers may not add to the family’s wealth directly. But their contribution to managing a household and taking care of the expenses can be quantified in monetary terms. We can simply see the cost of running the household without the homemaker and we have a number.
Thus, kitchen and other household chores for which you will spend money in the absence of the spouse, become her contribution to the family’s wealth. For example, if all these costs combined comes around Rs 25,000 a month, your homemaker spouse has an HLV of about Rs 35 lakhs at the age of 30.
So, while planning a term life cover for yourself, you should also consider including your homemaker. The added cover will help the family maintain the financial status in case of the early demise of the spouse.
Benefits of Joint Life Cover With Your Spouse
There are many reasons for the joint cover than separate single covers. If you are a couple where both spouses are working and have individual car loans and personal loans, joint term insurance is a good idea. The insurance helps covers outstanding loans and secure the future of your children in case of any mishaps to you or your spouse.
1. Reduced Premiums
In most cases, the joint premium of a term plan covering the two spouses could be considerably less than if there were 2 separate policies for each spouse. If you take only one individual policy, when the covered spouse dies, the 2nd spouse is not covered by a policy.
At this time, it is possible that the surviving spouse may be much older and will have to pay a heavier premium for a new policy. Also, if the surviving spouse is a homemaker, without a direct income she may not be eligible for a term cover.
2. Protection for Both Spouses
With a joint term plan for spouses, children may receive a higher sum assured in the unfortunate event of losing both parents. Of course, you have to choose a term plan which makes pay-out for both spouses separately, and not just one. If you do that, beneficiaries will receive the sum due for each spouse on their deaths.
3. The Convenience of Managing Policies
Taking a life insurance plan includes paperwork, signatures etc. With one policy instead of two, the paperwork is halved. Also, you have to pay regular premiums on fixed days. So, you have to remember at least 2 sets of dates to pay the premiums if you have separate policies.
Also, remember that a non-earning spouse may not be eligible for a direct term cover. So, the only way you can provide a life cover to her is by adding her to your existing policy or buying a joint term plan.
With term insurance plans like iSelect Star from Canara HSBC OBC Life, you can add your spouse to your existing plan within one year of purchase.
Premium Waiver Benefit
One important reason that you might prefer a joint term plan with your spouse, is that on the death of one spouse, the other spouse receives a waiver of premium. So, the term plan remains active, without the need of paying any more premiums. Yet, the surviving spouse will be able to claim the policy’s benefits. The dependants will also be able to get the assured sum on their death.
Selecting the Perfect Term Insurance Plan
A joint term plan is a decision made by both spouses, and it is necessary to take a joint decision on which one works for both of you. While planning you should keep in mind, not just the best-case scenario, but also the worst-case scenario. You should understand your own needs, desires and requirements before proceeding.
Here are the important features and benefits you should ensure in your joint term life insurance:
- Opportunity to increase the base cover amount at important life events such as childbirth, home purchase, etc.
- Option to give out death benefit as regular monthly income, possibly growing yearly to factor in the inflation
- Also, provides added covers such as disability insurance and cover against life-threatening diseases
Canara HSBC OBC Life’s iSelect Smart360 Term Plan offers critical illness cover as a part of term life cover. Thus, both you and your spouse are automatically covered against dreaded diseases like cancer and heart failure.
Apart from all the features and benefits, iSelect plan also offers InstaPromise, for settlement of death claims. InstaPromise sets out the conditions for settlement of death claims within one working day.
In all, it makes sense to buy a joint life cover with your spouse. This gives reassurance to both spouses that each of them, and their dependents will be taken care of, together.