Should you split insurance cover or have multiple insurance policies?

How many life insurance policies can one person have?

Yesterday, I got one interesting query regarding life insurance term plans that whether one should buy multiple insurance policies or second insurance policy when he is already insured under one plan? At first sight, I said there is no such requirement but when I gave a second thought on having multiple life insurance policies, I was convinced that it would be beneficial in different ways.

Read: Tax Benefits of Life and Health Insurance Policy

I have penned down the benefits for having multiple life insurance policies in the article below. However, one may consult with his/her financial planner before reaching on any conclusion.

Benefits of having Multiple Insurance Policies

1 Various Maturities

With the changing life style and changing needs experts suggest that one should be insured up to the age of 65 years. Multiple Insurance Policies helps you to cope with the changing needs at different life stages and cover your various liabilities towards your dependents.

What I mean to say is suppose you have a home loan of Rs.10 lakh for 10 years then there is no sense to include this amount while taking insurance policy for 30 years. You could take one insurance policy for Rs.10 lakhs for 10 years and another one for rest of your life. In case you repay your loan/debt, you can stop paying premium towards policy or can close the policy.

You can also go with another option for the same condition by enhancing your life cover by taking add-on cover to your existing policy but the disadvantage with this option is that you cannot discontinue the policy when the loan/debt is paid. So it is better to go with multiple insurance policies rather than add-on cover.

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2 Mitigate the Risk of Claim Rejection

At the time of taking insurance, Insurance Companies asks you to disclose your medical history and go through complete medical checkup, if you declare all the information about your health correctly and undergo the required medical check-ups than there are almost no grounds on which medical insurance company rejects your claim. However, a minor possibility of rejection of claim cannot be ruled out.

To overcome this dilemma, you can get yourself insured under two insurers. In case one insurer rejects and another accepted the claim, the entire sum is not lost. Also on the ground of acceptance by one insurer, the dependants can write to the first insurer asking them to review the claim rejection again.

Read:?Best Online Term Insurance Plans

3 Enhanced Life Cover

Another instance of benefit of multiple insurance policies is that major liabilities of an individual comes at the age of 50 year to 60 years i.e. higher education of children or marriage and if that time unfortunate event occur than it may be not be possible for your dependents to do all the things with your single cover.

To overcome this stage, you could take multiple insurance policies at different age i.e. suppose you are just 27 years old than you should take one insurance policy for 30 years now which shall cover you till the age of 57 years and take second policy at the age of 35 years for 30 years which shall cover you till age of 65 years. By doing this you have doubled your insurance cover for the age period of 35 to 57 years wherein most of the major liabilities accrue.

Read: What is the Minimum Sum Assured in Life Insurance Policy?

4 Smaller Insurance Covers

LIC provides high claim settlement ratio still chances of getting your claim stuck (not rejection) are there. So to avoid getting stuck in long process one should get insured under various insurers considering claim settlement ratio as well as time taken to settle claim.

Remember that instead of taking individual cover for each liability you can sum-up all the liabilities ending around same time such as if you have taken home loan for 15 years and education loan for your children for 7 years than you can sum-up both the loans and take a single insurance policy to cover these liabilities.

Taking different cover for different liabilities will be costlier and also reduces your main life insurance cover. So do not go for more than two insurance policies in which one policy should strictly cover you till the age of 65 years which adequate life cover.

Read: Cancel you Insurance Policy in Free-Look Period?

5 Difference Nominees

For the sake of better job opportunities and high earnings, many people leave their home town and get settled outside. And with this rising trend of nuclear families, every individual might have more than one family to take care of.

So in case of early demise of insured, it becomes easy to cater the needs of his/her own family as well as his/her parents by taking multiple insurance policies and assigning different nominees in each policy such as spouse under one while parent in another.

Read: Best Tax-Free Investment Options in India

Points to Ponder while?Buying Insurance Policy

1. Try to get insured as early as possible to get the maximum cover at minimum cost. However, insurer gives maximum 25 times of your annual salary. For instance if your reported income in ITR is Rs.4 lakh per annum than the maximum cover you can get is Rs.1 crore. So if you planning to get higher cover than you may have to wait till your salary reaches up to that level.
2. Do not split too much. Ideal case is 2 insurance policies. Having multiple insurance policies may?put extra burden on your pocket and sometimes keeping records and remembering due date of paying premium towards each insurance policy may become cumbersome task.
3. Do not buy insurance policy blindly, do enquire and compare various insurers online and take decision based on your requirements. Also, Term insurance should not go beyond the age of 65 years as after this age you wouldn?t be having any dependent on you.
4. Do not forget to tell about your?policies to your legal heirs else in the case of your demise nobody would take claim and the sole purpose of taking policy will not be fulfilled.

Do you have multiple insurance policies? If not but thinking to split your life insurance cover, than do share your experience in comment box below.

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