Is it Possible to Purchase Multiple Term Insurance Policies. Deciding to have more than one term insurance policy is a smart move when you think about the future. But, it’s crucial to think carefully and be cautious about this decision. Before you go for multiple term insurance plans, take the time to think about the good and bad sides, and understand the terms and conditions of each plan.
People like term insurance because it usually has affordable premiums. However, having just one plan might not be enough as your financial needs change in different stages of life. Getting multiple term insurance policies can be a stronger financial strategy for the long term. You can get as many plans as you need, depending on what you require and can pay for. When applying for a new plan, it’s very important to be open and honest about all the term insurance plans you had before.
Is it Possible to Purchase Multiple Term Insurance Policies
This honesty is a big requirement when you want a new term insurance plan. The person who decides whether to give you the plan looks at your overall life insurance needs. They also consider all the insurance plans you had before (both term and other life insurance plans) to figure out how much coverage they can offer you. In short, having more than one term insurance plan in India is allowed, but you have to be completely honest. If you don’t tell about your previous plans, your claim might be rejected because you didn’t share all the information.
Now, let’s look at the different benefits of having more than one term insurance plan to understand them better.
Advantages of Holding Multiple Term Insurance Policies
1. Tailored to Different Life Stages
As life progresses, financial goals and priorities change. In your 25s, you might focus on building a family, while at 40, priorities may shift to children’s education and post-retirement planning. Choosing term plans based on evolving needs is crucial to align with changing responsibilities.
2. Increased Coverage at Lower Costs
Having multiple term insurance policies contributes to a larger coverage and is often more cost-effective than a single plan. Diversifying plans among different insurers is wise for higher coverage amounts, and it’s essential to declare existing plans when buying new ones.
3. Mitigating Claim Rejection or Delay Risks
With multiple plans, the risk of claim rejection or delay is spread across insurers. While accurate information is crucial, unintentional omissions may occur. Having diverse plans reduces the likelihood of facing the same concerns with all policies, minimizing the risk of claim rejection or delay.
4. Benefits of Additional Riders
Owning multiple term insurances allows you to benefit from various riders. Different plans offer different additional benefits, providing a wide range of options with multiple plans.
5. Improved Benefits Over Time
The life insurance industry evolves annually with continuous innovation. Older term plans may have limited benefits compared to newer versions from the same or different insurers. Opting for multiple term insurance plans ensures access to upgraded benefits and competitive pricing.
6. Higher Loan Facility Support
Purchasing an additional term plan can be advantageous when considering loans. As longer-term loans like business or home loans accumulate after the first term insurance purchase, relying solely on a single plan might compromise future benefits. Having an additional term insurance policy equivalent to the unhedged loan amount provides crucial support.
Key Points to Remember
While having multiple term plans from different insurers can offer various benefits, it comes with the challenge of efficient servicing, including premium payments and claims.
1. Timely Premium Payments
It’s crucial to pay all the premiums on time for each of your term plans to prevent policy lapses. A helpful tip is to automate premium payments through your credit card or bank account, ensuring timely payments without manual intervention.
2. Organized Claim Documents
Keep all your claim-related documents in one place for easy access. Inform your nominee(s) about this centralized location. A useful tip is to store these documents securely in your eInsurance Account (eIA) and share the password details with your nominee for potential future access.
3. Address Updates and Servicing
Managing multiple points of contact for various insurers, especially for tasks like address changes, can be challenging. Simplify this by updating your address details in your eIA. This ensures that all your insurers are instantly informed of any changes.
Concept of Human Life Value
The coverage amount in a term insurance plan is determined by your Human Life Value (HLV), which is evaluated by the underwriter. HLV reflects your financial worth based on factors like income, liabilities, and savings. Before issuing a new term insurance policy, the underwriter assesses your overall life insurance coverage, taking into account all existing plans.
A basic guideline for estimating HLV considers different age groups. For example, individuals aged 18 to 30 may qualify for 25 to 30 times their annual income in coverage, while those aged 30 to 45 can choose 20-25 times, and those aged 45 to 60 may apply for 15-20 times their annualized income. It’s important to note that these figures are illustrative, and each insurer’s underwriter may have their own internal calculations.
When thinking about additional term plans, you’ll need to provide evidence of previous plans, including riders, and share income details with the insurer’s underwriting department for evaluation before the new policy is issued.
In summary, having multiple term insurance policies is feasible if you can pay premiums and maintain them throughout the policy duration, ensuring they are accessible when needed.
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