Advantages and disadvantages of having several term insurance plans

Term insurance is a long-term insurance policy that ensures that an insured’s dependents and family members remain financially intact even after the death of the insured.

As important as it is to purchase term insurance, it is just as important to purchase a term insurance policy with the right amount insured. The sum insured should be sufficient to ensure that the regular needs and long-term goals of the family are met in step with future inflation. However, it is quite common that one cannot assess the required corpus at the time of purchase 20 to 30 years earlier and that one can end up buying a term insurance plan with a sub-optimal insured amount. .

As there is no possibility of supplementation in term insurance as in health insurance, the policyholder can add several term insurance plans according to his needs. It is legitimate in India to have multiple term insurance plans as they offer various benefits like bigger claim amount, different benefits and security for the future.

While you are considering opting for another term insurance plan, the applicant may look for another company to purchase their second plan. Different businesses have different features, benefits, inclusions, and exclusions. . Thus, it is advantageous to select separate companies for separate plans. However, it is still mandatory for the policyholder to disclose an existing term insurance plan when purchasing a new one.

Why several packages

Although many term insurance plans in addition to great coverage can become a little expensive than one term insurance plan, they do offer a bunch of benefits. Diversifying term insurance among multiple insurers is also a better idea when coverage is important. Because sometimes a higher coverage of, say, 1 crore can be delayed to be settled at the time of the claim, while a claim for an amount less than ₹ 1 crore can be easily settled. In addition, depending on the different underwriting policies of each company, the authorized insured amount may vary. For example, if the underwriting does not allow ₹ 1 crore of the insured amount due to health issues, in such scenario, a person can opt for multiple term insurance plans to get the desired amount.

In addition, if a person, having multiple insurance policies, feels a burden in paying for term insurance or does not need the large amount of the corpus at the age of 50 due to the performance of tasks family, then she can cede a few of the multiple plans without losing all of the term insurance support.

In addition, the insurance industry is constantly evolving, as are the products offered. A term insurance product designed and purchased 20, 10, or even 5 years earlier may be a simpler product compared to products with new features currently available. This includes spousal coverage, Accelerated Critical Illness Payments, Conditional Waiver of Premiums, Accidental Death Supplementary Payment, and Child Benefit riders, all available in term insurance plans. Depending on the evolution of his financial / personal needs, one can choose a term plan that complements them and reinforces the existing term plan.

Another reason to consider purchasing new term insurance is loans. Home, business, or other long-term loans may have accrued after the initial purchase of the term plan. Relying only on the original term insurance can deprive dependents of any potential benefits if an additional term loan is not purchased, equivalent to an uncovered home or business loan.

The insured amount of the term insurance sum cannot exceed the Life Value (VHL) of the policyholder. It is the person’s monetary value based on income, savings and liabilities. Nowadays, life insurance companies offer insurance coverage based on the age of the insured. For example, a person 18 to 35 years old can receive 25 times their annual income, a person 36 to 40 years old is entitled to 20 times their annual income and a person 40 to 50 years old can receive 10 to 15 times their annual income. . The policyholder, however, must provide proof of annual income to avail several policies.

The author is the Founder and CEO of PolicyX.com, an IRDAI-approved web insurance aggregator.

(This is a free article from the Premium Portfolio segment of BusinessLine. For more such content, please subscribe to The Hindu BusinessLine online.)


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