It is essential to have a term insurance plan to protect your family from financial distress in your absence. A term plan is a pure life cover with no maturity or survival benefits. So, it comes to a lower premium in comparison to other life insurance policies. However, you may wonder if it makes sense to have more than one term plan.
Experts recommend that a single term plan may not be adequate to cover your family’s needs at various life stages, as financial goals change over the years. Multiple plans with different policy tenures allow you to shield your family members as per their changing financial objectives.
Here are three benefits of purchasing multiple term life insurance policies:
- Less possibility of claim rejection
If you have not concealed any relevant information about your health condition and lifestyle, the chance of claim rejection is almost non-existent. However, insurers do reject claims even if the probability of this is marginal. So, in this case, your family will not receive the death benefit. Therefore, it will be wise to buy more term plans to ensure that your family does not face any financial crisis when you are not around. Additionally, your nominees may ask the insurer to re-look the claim rejection when the other insurance companies have successfully settled their claim.
- Flexibility to choose multiple insurers
While selecting the insurer, you must check the claim settlement ratio to make sure that the risk of rejection is minimal. If you have purchased an online term plan from one company and if you find that the claim settlement ratio is low, you can buy another plan from a different insurer.
- More coverage to meet different financial goals
You may have invested in an online term plan at a cost-effective premium when you were young with limited responsibilities. However, as you grow older, your obligations rise. Multiple term insurance policies enable you to enhance the life coverage as your responsibilities grow. You can also purchase term plans with different maturities to cover various life goals and avoid unnecessary costs. You can use a term insurance plan calculator to check the sum assured (SA) required to meet the needs of your loved ones at different phases of life.
Having understood the advantages of multiple term policies, here are three conditions you must fulfill to make claims:
- SA should not exceed human life value (HLV)
HLV is the monetary value of your life. It depends on your income, liabilities, and savings. It is also the value denoting the loss of income and an increase in the liabilities for your family in case of your sudden absence. Most insurers allow maximum coverage of up to 10 times your annual earnings. If your income is eligible for greater coverage, you can choose multiple term plans by submitting income proof. However, the total SA under all the policies cannot be more than the HLV.
- Health condition
When you want to buy another term plan, you will need to undergo a medical checkup before the insurer accepts your proposal form. If your health is good and your income meets the eligibility criteria, you can purchase more policies.
- Disclosing information about all other term plans
At the time of purchasing another term insurance plan, you will have to share details of your existing policies with the insurer. If you do not provide this information, the insurer may reject your family’s claim in the future.
There are many plus points of buying multiple term plans; however, managing more than one policy maybe a little more cumbersome, as you will have to pay several premiums on time. Additionally, your family will have to undergo the claim filing procedure with multiple insurers if the need arises in the future.
When you buy more than one term plan, you may end up paying more as a total premium. You can use an online term insurance plan calculator to check the same before making your decision.
It is advisable to review your insurance coverage at regular intervals during different stages of life. If you think there is a need for additional coverage, you can opt for another term policy to secure the financial future of your dear ones.