Pros and Cons of Having Multiple Term Insurance Plans in India

Financial experts often consider term insurance an essential inclusion in the financial portfolio. But have you ever thought, why is it so? There are several reasons for this, such as it is the simplest form of life insurance among all insurance policies available in the market. So, let’s deep dive into the concept of term insurance.

What is Term Insurance?

Term insurance is a pure protection plan with clear and easy-to-understand guidelines wherein you pay a premium against which you get a life cover (guaranteed sum assured). If something happens to you within the policy term, the policy nominee receives the insurance payout amount as mentioned in the policy. And in case you outlive the policy term, then nothing is payable.

Also, considering customers’ changing requirements, insurance providers have introduced term insurance with maturity benefits known as term plans with return of premium. The functioning component of such plans is as old as any conventional term plan, with a slight distinction wherein if the policyholder outlives the policy term, he or she receives all the premiums paid at the policy maturity. Due to this aspect, term insurance with return of premium benefit has a higher premium than conventional term plans.

But, as it is important to buy term insurance, it is equally essential to choose the right sum assured to ensure that your family member’s long-term goals and regular expenses are taken care of in sync with the inflation in the future. However, it is quite difficult to assess the funds required for the long run. And as term insurance policies do not come up with any top-up facility like health insurance, policy buyers end up buying multiple term insurance plans based on their requirements and to have broader coverage for the safe future of their family members. The policyholder must disclose the existing term insurance plans while buying a new one.

Now let’s understand the pros and cons of buying multiple term insurance plans and analyze whether it is worth buying multiple term insurance.

Advantages of buying multiple term insurance plans in India

• Buying multiple term insurance plans from different insurance companies provides various benefits, features, inclusions, and exclusions. Hence, if you don’t get the desired benefit from a particular insurance company, you can get it from the other one and fulfill your requirements.
• If you need larger coverage, buying diverse term insurance plans from multiple insurance providers could be ideal because a term plan with a higher coverage amount of Rs 1 crore might get delayed because of extensive investigation. In contrast, a claim of a lesser amount might get easily approved.
• Also, opting for multiple term plans could be beneficial as the permitted sum assured might vary based on the underwriting policies of each insurance company. Such as in case the underwriting does not allow Rs 1 crore of sum assured amount because of the health conditions, then you can choose multiple term insurance plans to get the desired sum assured amount.
• Suppose the policyholder feels burdened with paying premiums for multiple term insurance policies. In that case, he or she can surrender a few of the term plans out of various plans without losing the benefits of all the term plans.
• With the insurance industry constantly changing and evolving, another advantage of opting for multiple term insurance plans is receiving the latest benefits and features. For instance, term insurance bought 10 or 20 years back might be insufficient for your current requirement or don’t comprise of the new features available such as spouse coverage, children benefit rider, additional payout in accidental death, accelerated payments on critical illness, or premium waiver benefit. Therefore, based on your changing financial and personal requirements, you can opt for those which compliments them and strengthen the existing term insurance.

Disadvantages of buying multiple term insurance plans

• Multiple term insurance plans come with several benefits, but they are expensive compared to a single term insurance plan.
• The sum assured amount of the term insurance policy can not go beyond the policyholder’s Human Life Value (HLV). HLV is a person’s monetary value based on his or her income, liabilities, and savings. Life insurance providers nowadays offer term plan coverage based on the insured’s age. Such as a person between the age of 18 to 35 years is eligible to get term insurance coverage about 25 times of their annual income, similarly, a person of 40 to 50 years of age can get the sum assured 10-15 times of their annual income. Therefore, availing of a desired sum assured amount comes with a certain limitation. And the policyholder is required to present proof of annual income to buy multiple term insurance policies.

The bottom line is term insurance is a long-term commitment that ensures that your loved ones are financially secured even in your absence. With all these benefits in place and others in the case of term insurance, customers tend to buy multiple term insurance policies to enjoy more benefits and have a larger coverage. Multiple term insurance policies indeed provide larger cover but are more expensive than a single term insurance plan. Hence, before buying a single or multiple term insurance policies, you need to consider your needs and requirements and then consider purchasing a single policy or multiple ones. If you want to know about different term insurance plans available in the market, head to iiflinsurance.com and choose the right one for yourself and your family.