Term insurance is a long-term insurance policy that ensures that dependents and family members of the policyholder remain in their financial condition even after the policyholder’s death.
Although it is important to purchase term insurance, it is equally important to sign up for a term insurance policy while ensuring the appropriate amount. The amount guaranteed should be sufficient to ensure that the regular needs and long-term goals of the family are met in conjunction with future inflation. However, it is very common that one will not be able to value the required combination at the time of purchase 20-30 years ago and may end up buying a term insurance plan for a suboptimal guaranteed amount.
Since there is no additional facility in term insurance like in health insurance, the policy holder can add multi term insurance plans as per his/her needs. It is legal in India to have multi-term insurance plans as it comes with various advantages such as larger claim amount, various benefits and safety for the future.
While you are planning to go for another insurance plan, the applicant can search for a different company to purchase his second plan. Different companies have different features, benefits, inclusions, and exclusions. . Thus, it is beneficial to choose separate companies for separate plans. However, it is always necessary for the policyholder to disclose existing term insurance plans at the time of taking a new one.
Why multiple plans
While multi-term insurance plans that add up to a great deal of cover may get a little more expensive than a single-term insurance plan, they do come with a host of advantages. Diversifying term insurance among several insurance companies is a better idea when the cover is large. Because, at times, a higher coverage of ₹1 crore may delay getting settled at the time of claim, while a claim of less than ₹1 crore may be easily settled. Furthermore, based on each company’s different underwriting policies, the guaranteed amount allowed may vary. For example, if the underwriting does not allow Rs 1 crore of the amount guaranteed due to health conditions, in such a scenario a person can opt for multi-term insurance plans to get the required amount.
Additionally, if a person, who has multiple insurance policies, feels any burden to pay for term insurance or does not need a large amount of insurance by age 50 due to completing family duties, he/she can waive a few of the plans Multiplex without losing the entire insurance support period.
The insurance industry is constantly evolving and so are the products offered. A term insurance product that was designed and purchased 20, 10, or even 5 years ago may be a simpler product compared to products with new features currently available. This includes Spouse Covers, Expedited Critical Illness Payments, Conditional Waiver of Premiums, Additional Payments in the event of death from an accident, and Child Riders benefits all available under term insurance plans. Depending on the evolution of an individual’s personal/financial needs, one can choose a term plan that complements and enhances the existing term plan.
Loans are another reason to consider purchasing new term insurance. Home, business, or other long-term loans may mature after the initial plan is purchased. Reliance on the original term insurance alone may deprive dependents of final interest if an additional term loan equivalent to the unhedged home or business loan is not purchased.
The term insurance amount cannot exceed more than the Human Life Value (HLV) of the policy holder. It is the monetary value of a person based on income, savings and obligations. These days, life insurance companies offer insurance coverage depending on the age of the insured. For example, a person between the ages of 18 and 35 can get 25 times their annual income, while a 36-40 year old is eligible for 20 times their annual income and 40-50 years old can get 10 15 times his annual income. However, the policy holder is required to provide proof of annual income to benefit from multiple policies.
The author is the founder and CEO of PolicyX.com, an IRDAI-certified web-based insurance aggregator.