How To Deal With Joint Insurance At Separation?

A divorce is one of the most painful event and we understand what you are going through. In divorce, you don’t just need to feel detached from things and places, but also need to think of finances. Till the time, you have been dealing with your financial instruments jointly, everything seems a cakewalk but when it comes to separating things, your joint life insurance policies, along with other financial instruments, can be a big headache.

To reduce some of your hassles, here we have decoded what needs to be done, in such situations, with the joint life insurance policies.

Joint life insurance policy covers both husband and wife under same policy and have one sum assured for both the policyholders. Since the probability of claim under joint insurance policy is twice than of individual life insurance plan, the premium is bit higher than single individual life insurance plan, if we consider an individual life insurance policy for same sum assured amount. Also if claim is made, the policy gets terminated after the payout. On the other hand, if we consider the life coverage for both the lives, instead of one, joint insurance policies are cheaper than two individual insurance policies.

But when life is at crossroads, cheaper premium do not look attractive. And it becomes so much better to get out of that insurance policy, instead of keeping the strings attached. To do so, you have to convert it into individual policy and get the sum assured adjusted as per your new needs and status. Also, do not forget to change the name of the nominee, if required.

To convert a joint life policy into an individual one, some legalities and modifications are likely to come into play. Let’s find out:

Game Of Changing Life Cover

To convert a joint insurance policy to an individual one, the first thing that you have to decide is whether you want to change the life cover as per your needs or like to keep it as it is. Also, it would be of help here to find out whether your existing policy has an option to increase/ reduce the sum assured. In case it has, understand your changed liabilities and dependents.

The company will change the sum assured in your life insurance policy by considering your assets and liabilities. For instance, if your liabilities are decreasing with divorce (your non-working wife is no more dependent on you), the sum assured can be decreased, resulting in lower premium. 

However, on the other hand, if your spouse was working and insurer has taken into account her income as well, which is no more there, your net worth has decreased for the insurer, bringing down the sum assured. In such a case, you may require increased sum assured as the sole responsibility of dependents will come to you. However, to find out your eligibility to do so, you need to contact your insurer.

The premium ideally gets reduced in case of reduced sum assured term plans. However, the decision of reducing the premium lies solely under the discretion of insurers. The sum assured, if reduced in ULIPs, should have no effect on your premiums, as more funds will likely to start flowing in your investment basket.

Here, the question arises, what do you need to do if the joint life policy doesn’t have a provision to alter sum assured? In such cases, you can go for top-up or rider or else take a completely new policy, if you want to get increased sum assured. If your policy is very old with inadequate sum assured, it makes more sense to go in for a new insurance policy with higher sum assured.

Nominee Game

To change the name of the nominee (beneficiary) from your insurance policy, you have to place a request at insurer’s office. In case, your children are minors and you want them as nominee of your insurance policy, you will have to choose a guardian compulsorily, out of your blood relations or other close relatives. Once they attain 18 years of age, they will be eligible to claim the benefits, in case of death of the life insured.

To further change the name of nominee, all you need to do is to adopt the same procedure.