Many individuals have multiple traditional life insurance policies. But is it possible in the case of term insurance plans? Do you just need one term plan? Or should you have more than one? Purchasing multiple insurance plans is quite common and legal in India. But the question is: Do you need them? Should you buy multiple term insurance policies? Let’s discuss the answers to these questions in detail:Read more
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A Term insurance plan is a specifically designed life insurance product that secures an individual’s family and provides them financial protection in case of any unforeseen situations. Like most insurance policies, an individual pays a premium for a specified tenure. If the individual dies during that term because of any health reason or accident, then the nominee is provided with a death benefit equivalent to the plan value. This policy can range from 10 years to 30 years. The premium amounts are calculated using a term insurance calculator on the basis of different factors such as an individual’s age, life expectancy, and medical conditions. Insurance companies sometimes ask the individual to perform a medical examination before finalizing the plan.
Here are the term insurance benefits:
Protect the future of the Policyholder’s family
Covers up the loss in the policyholder’s absence
Contributing parameter in fulfilling financial responsibilities
Allows to opt for more than one term insurance plan
Guaranteed death benefit
Cover for Critical illness
Flexible premium payments
Tax saving benefits u/s 80C and 10 D of the Income Tax Act, 1961.
Here is what happens with most Indian Citizens. Parents purchase traditional insurance plans in the name of their children. Once these children grow up and earn, they purchase term insurance plans themselves. After a few years, the increased responsibilities of a growing family make them realize that the existing insurance plan is not sufficient. This leads to the purchase of multiple term insurance policies. So, it is a good idea to buy two or multiple term insurance policies.
Simply put, Multiple term insurance policies allow an individual to subscribe to an insurance policy on the basis of the life stages reached by the dependents. These milestones include education and marriage of children or any other requirement in the life of policyholder’s dependents.
Let’s understand this with the help of an example:
Raman wanted to buy a term insurance policy, which would provide financial protection to his loved ones in case of his unfortunate death. But he sometimes thinks about what would happen to his family if the claim of the death benefit was rejected by the insurer. He often thought of buying multiple-term plans to relieve his fear. Then, after consulting with a financial consultant, he came to the conclusion that he could buy multiple term plans provided his total SA from all plans should not be higher than his/her Human Life Value.
Following are the advantages of availing multiple term insurance policies:
Having multiple term insurance plans can help a life assured to avoid the claim rejection risk in case of the policyholder’s unforeseen death. Even if one insurer rejects the claim, the life assured can have another company as an alternative.
In case of unforeseen demise of assured, the nominee receives death benefits from multiple companies. This makes sure that the assured’s dependents have sufficient financial resources at their clearance.
An individual can choose insurance companies having a high claim settlement ratio (CSR) to make sure that one doesn’t have the risk of facing claims rejection.
While term plans are relatively more economical than other life insurance policies, their benefits may not be enough for your needs. Thus, to avoid a scenario where your requirement for coverage increases, it is better to purchase 2 or more term plans in advance.
If you have ever thought ‘Can we buy two or multiple term insurance policies?’ Yes, you can buy. Read on to know more about why you should go for multiple plans.
At the time of buying a term insurance plan, you can decide on its maturity time after which the plan will not provide coverage to you. With age, your responsibilities increase along with your life stages and you will need more cover, thus more additional term plans. Thus, you should consider having 2 or more term insurance plans as your requirements increase and your coverage requirement increases.
HLV denotes the amount a person is likely to earn as income over the rest of their life after they have purchased a term insurance plan. The HLV calculator establishes the right life cover for any individual based on the person’s profile, liabilities, income, and savings. Most insurers allow insurance coverage which is 10X the annual income of the person. If the person’s total income is entitled to high coverage, the policyholder can avail of multiple-term plans. The life assured, however, has to provide annual income proof to avail multiple plans but the sum assured amount of all the plans cannot exceed the Human Life Value. With multiple life insurance policies, a life assured ensures that their nominees/beneficiaries can avail the benefits of their HLV even in case of the policyholder’s absence.
Riders are additional benefits that one can get with your term insurance plan by paying a substantial extra cost. By investing in multiple term plans, the policyholder can make sure that he/she receives benefits from different riders.
It is always good to have multiple term insurance policies so that your nominee/beneficiary can meet their different life objectives at different life stages. However, to make sure that the nominee’s claim is not rejected later and to be completely transparent, the policyholder is required to inform the insurance company about the different term plans that he/she has availed. Multiple term insurance policies protect the interests of the insured in the best possible way. It is a flexible and affordable option that covers your family’s financial future in your absence.
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