Is it worth having multiple term insurance policies?
A prospective policy buyer can decide to buy multiple term insurance policies based solely on his or her individual circumstances. There is no legal restriction on buying multiple term insurance policies. However, it is not advisable to purchase too many policies. It must be needs-based.
With growing awareness and an increase in income, more and more individuals are opting for term insurance to cover their financial risks. Many buyers are also opting for multiple term insurance policies. However, what needs to be assessed is the need to buy multiple term insurance plans. The buyer needs to ask himself the pertinent question: Do I need multiple Term Insurance Policies?
It’s legally permissible to have multiple term policies, and if one so desires can opt for various plans to ensure increased security and greater coverage.
However, an individual needs to consider his individual circumstances and the need to have an additional policy. If one feels the need, additional term insurance is always welcome. However, all previous policy details must be furnished while buying a fresh policy— failure in doing can result in rejection of the claim. The guidelines can even cause tracking problems.
Do we need to buy more than one term of insurance?
In the present scenario of increased income and improving lifestyles, investing in Term Insurance and additional insurance is advisable to meet the family’s needs. However, it’s the individual’s responsibility to decide whether purchasing an additional policy will be beneficial for him. Insurance Companies have specific underwriting guidelines based on the insured’s annual income, age, and ability to pay premiums. It is recommended that one must always cover up to the maximum eligibility limit.
With the passage of time and growing family income, insurance needs to be expanded to give ample coverage to the family’s growing needs. Given the expanding size and needs of the family, a single policy may not suffice. It is important to take into account the fact that younger policyholders are entitled to a maximum insurance amount of up to 20 times the annual CTC. The elderly are entitled to 10-15 times the annual CTC. Therefore, it is always advisable to get coverage for the maximum insurance amount.
With the passage of time, the financial responsibilities increase and change in nature. Selecting a single term insurance policy in one’s ‘30s and expecting it to provide ample coverage in the ‘50s may not be viable. Different term insurance policies have separate plans, and one can create multiple suitable plans. Care must be taken to ensure timely premium payments to keep multiple policies valid.
Top Benefits of Multiple Term Insurance Plans
- More Security and Coverage
- Comprehensive Coverage
- Different plans to cater to different needs
- Tax Benefits
More Security and Coverage
Financial experts view term insurance primarily as a hedging investment and risk mitigation tool. It can be treated as an alternate plan or plan B. Benefits like mortgage collateral also accrue from the same.
One can always opt for multiple term insurance policies to provide increased security and greater coverage for the family members. Multiple policies ensure more money and a greater sense of security in case of any unforeseen calamity. Ensure that all details of any pre-existing plan are provided to the insurer. One can also opt for an e-Insurance Account to manage the policies better.
Comprehensive Coverage
Additional policies can help ensure greater coverage to meet the needs of your loved ones. Multiple term insurance policies provide optimal insurance coverage.
Insurance is used as a “risk mitigation tool” rather than an investment. As a result, it offers the insured greater peace of mind and hence achieves more significant levels of productivity.
It is recommended for the younger age group to opt for high coverage to save on premiums. However, this may not be feasible for everyone. One may lack intent or consciousness as well. Selecting a different term insurance policy can also ensure greater insurance coverage.
Different plans to cater to different needs
Different policies are needed to cater to varying financial needs. For instance, replenishing income after death requires a term plan, whereas a Child Plan helps create financial support for the child’s future.
One can invest in a ULIP Plan if one is seeking a return on investment. However, retirement plans are better suited for post-retirement benefits. Since all types of Term Insurance Policies can fund specific goals, multiple insurance policies can create a diverse portfolio that will cater to all financial requirements.
Tax Benefits
Term Insurance can provide one with increased savings and better tax benefits. The premium one pays toward the Term Insurance Plan can help one save money in the present as a tax benefit. In addition, one can avail of deductions of up to Rupees 1.5 lakh under Section 80C.
If one purchase multiple plans and the total premium is higher, one can optimize tax savings by claiming the maximum permissible amount under Section 80C. The tax benefits are also extended to the death benefit given to the nominee. Thus, in case of any unfortunate incident, the family receives the policy holder’s death benefit or sum assured completely tax-free.
A Final word
When one buys an additional Term Insurance Plan, one needs to pay an extra insurance premium as well. One may find it challenging to manage multiple policies. However, one can opt for various policies when the benefits outweigh the difficulties. Having multiple Term Insurance can cater to different life situations. Different plans resonate with different classes of buyers. An add-on helps in improving the benefits of the Term Insurance.
