Term insurance is a valuable tool that offers financial security to your loved ones in the event of your unfortunate demise. It provides a high sum assured at an affordable premium, making it an ideal choice for many individuals. However, when selecting the right term policy, many people face a dilemma – how much coverage is sufficient? Moreover, always use a term insurance calculator to know the premium of your term insurance plan.
Should you consider having more than one term life insurance policy? This guide explores the benefits and drawbacks of multiple policies to help you make an informed decision.
When can having more than one term life insurance policy help?
Having multiple life insurance policies can be advantageous under certain circumstances:
If your claim gets rejected by one insurer:
Sometimes, due to incomplete paperwork or inaccurate health information, your nominee’s claim may get rejected by an insurer. In such cases, having multiple term plans can provide additional protection to your loved ones. With multiple claims, there’s a higher chance of at least one being accepted and supporting your family’s financial needs.
If your plan doesn’t allow you to increase coverage with changing life stages:
As your life and needs change over time, the coverage required may increase. If your current plan doesn’t offer the flexibility to enhance the cover, purchasing another life insurance policy can ensure adequate protection for your evolving responsibilities.
If you want better benefits:
Not all term plans offer additional features like riders. Riders such as critical illness cover can provide health insurance under your term plan. If your existing plan doesn’t have such options, buying another policy that offers these benefits can be beneficial.
You can also consider term insurance tax benefits while deciding on any plans.
What happens when you have more than one term life insurance policy?
Having multiple term insurance policies can offer several benefits:
Increased security:
Multiple plans provide added security for your family. Even if one claim is rejected, shuts down, or documents are lost, your loved ones will have a backup option to fall back on.
More financial support:
With multiple policies, your family will have access to a larger sum assured, providing them with the means to purchase a house, pay off debts, fund education expenses, and more. This ensures their financial well-being for an extended period without any concerns.
Peace of mind:
Having multiple policies eliminates the stress of dealing with claim rejections. Your family can rely on the sum assured from another policy and lead a stress-free life even in your absence.
Purchasing multiple policies can result in higher premium payments. This may force you to cut down on essential expenses or disrupt your current financial planning. As mentioned earlier, you should take the help of a term insurance calculator before purchasing a term insurance.
Should you have more than one life insurance plan?
While having multiple life insurance plans provides additional security, it’s essential to consider associated expenses. Sacrificing your present lifestyle to save for the future may lead to frustration and anxiety. Therefore, only opt for multiple plans if you can afford them.
Another crucial factor to consider is the total sum assured across all policies should not exceed your Human Life Value (HLV). HLV represents the financial value of a person’s life and is calculated by insurers. If the total sum assured exceeds your HLV, insurers may refuse to sell you additional coverage.
Illustrating the benefits of multiple term insurance policies
To understand the advantages better, consider the following scenarios:
Scenario 1: A young individual purchases a term insurance policy of ₹50 lakh at the age of 25 when they have no dependents or significant liabilities. However, as time passes and responsibilities increase, they get married and start a family. To ensure adequate coverage for their loved ones’ financial needs, they invest in an additional term policy.
Scenario 2: A person has multiple outstanding loans like a home loan or a car loan. They purchase a term policy to cover these liabilities and secure their family’s future from any financial burden in case of their demise.
Conclusion
When purchasing several term life insurance policies, it’s crucial to consider your financial capability and specific requirements. While having multiple policies offers increased security and financial support for your loved ones, it’s essential not to strain your present lifestyle with high premiums.
Consider your family’s future needs realistically and select an adequate sum assured amount accordingly. Compare different term insurance plans to find the most cost-effective options that align with your goals. Remember to use a term insurance calculator to determine the appropriate coverage based on your income, liabilities, and financial goals.
Lastly, be mindful of the restrictions imposed by insurers regarding the total coverage amount to ensure a smooth and hassle-free purchasing process. By making an informed decision about having multiple term insurance policies, you can secure your family’s financial well-being and provide them with peace of mind in times of uncertainty.
