We never like one of anything and always want to have more. Whether it is in the daily food we eat, the dresses we wear, the cars we drive or even the mobiles we have, variety is the norm. On the other hand, when it comes to buying insurance, most of us shirk away from the name itself. A majority of the Indian population go uninsured and even the little fraction that is insured have no sufficient coverage. Call it our psychological notion or the dislike of the premium outgo, buying a life insurance plan is either put off for a long time or invested in with the only view to save tax. In such a dismal scenario, talking about buying a second policy is voted down because the relevance of a second life insurance policy is usually lost on us. What about you? How many life insurance plans do you have in your name? If one, what about buying a second policy?
A second life insurance policy is nothing to be afraid of or confused about because it is beneficial in many respects. To put your mind to ease, I have listed below some common reasons why buying a second life insurance policy is a good thing. So, read on:
Supplementing Your Coverage
Having a sufficient coverage on our lives is very important whether in case of health insurance or life insurance. In health insurance, the expected medical cost is the basis of determining the coverage required while in life insurance you should estimate the value of your life. The coverage should be selected which should be optimum enough to compensate the economic value of the life of the breadwinner and as such a low coverage not good. Only a handful of people are reasonably insured while most of us having insurance are under-insured. As such, the second policy would help in supplementing the coverage level you already have from your first policy.
There are different types of life insurance plans designed to meet the different financial goals of one’s life. There are term plan which fulfill the requirement of income protection, child plans which help in securing the future of our child, Unit linked plans help in wealth creation while pension plans help in retirement planning. So, the one policy you have would not provide a complete solution to your financial goals and so other policies are necessitated for the same.
For Wealth Creation
Life insurance products are not only pertinent in providing financial security they also provide an attractive avenue for investment if the correct plan is chosen. Unit linked insurance plans provide the dual benefits of wealth creation through market-linked growth and insurance protection. So, if you thought that your policy only provides insurance, think again. A ULIP (Unit Linked Insurance Plan)also provides a good investment instrument and can be bought in addition to your existing life insurance plans.
How can I not mention the much-depended on tax exemption which insurance products provide! Premiums paid up to Rs.1.5 lakhs are exempt under Section 80C and any benefit received is also tax-free under Section 10(10D). Though the inherent tax relief should not be the only consideration for buying another life insurance policy, it could definitely have an influence on your purchase decision when it comes to buying the second policy.
So, buying that second life insurance plan is not a confusing or a bad idea. You would only get benefits from adding more policies in your name. An optimal coverage, fulfilment of financial goals, an investment avenue and tax exemptions are all the benefits that come with a second life insurance policy. So, don’t get confused or wary when your broker advises you to invest in another plan. Study the plan, find out its relevance in meeting your financial goals and buy it without hesitation. You would only thank me in the long run!
Disclaimer:Tax benefit is subject to changes in tax laws.