Would it be wrong to own a fleet of cars for your family? Certainly not if you can afford it. Same goes for life insurance policies too. You can hold as many as you can afford. But there is one fundamental difference.
You could own a number of cars as a collector or if you are planning to run a cab service. But life insurance is not a thing for enthusiasts or inventory to start commercial service. Then what are the circumstances where holding multiple life insurance policies makes sense?
It is perfectly legal to buy multiple life insurance policies and your family will not face problem in filing multiple claims. However, here is a list of five crucial factors you should keep in mind:
Buying multiple life insurance policies makes sense if you have multiple loans running. For example, if you have a home loan of Rs. 40 lakhs for 20 years and a business loan of Rs. 20 lakhs for 10 years, you can buy three life insurance plans:
This way you can cover both the liabilities as well as continue the protection of your family with a term plan.
Most lenders advise buying reducing term insurance which is linked to your loan balance. While it is better than not insuring the loan at all, you should keep in mind that this insurance policy will only take care of the remaining loan amount.
This is the most common cause of holding multiple life insurance plans. If you have multiple life goals, life insurance companies in India offer at least one plan for each of your goals. With all the variety available, you’ll see, holding more than one life insurance plan may just come as a natural choice.
According to guidelines issued by the IRDAI (Insurance Regulatory and Development Authority of India), all the claims related to Covid-19 treatment (including quarantine period) will be eligible to gain coverage under a standard health plan. It will be there to help the insured with the normal cover on hospitalization for all viral infections, including Corona. All the features you enjoy under your chosen health insurance plan will also apply to Covid-19 treatment. But to avail treatment through your medical insurance, you must be hospitalized at least for 24 hours. In the event of hospitalization, all your expenses will be covered for treatment of disease, including pre and post hospitalization expenses.
As you age two things happen:
One: Your family and income grows, which means you can buy more insurance
Two: Your life insurance need reduces if you are accumulating assets
You can choose whichever way you want your life cover to tilt. However, given the low cost of term life cover, you can easily choose to increase the life cover, instead of reducing it. Now there are two ways you can achieve this:
Canara HSBC Life’s online term plan iSelect Smart360 offers the second option to you. Life-stage increment option can save a lot of hassles for you as your family grows. Some important points to note:
Increase life cover upon three crucial life stages:
Thus, you do not need multiple life insurance plans to take care of, at least, your growing life cover needs.
You can buy as many life insurance policies as you want but, you should take care of the limit imposed by the human life value (HLV) estimate. HLV is based on your income and can go up to 20 times of annual take-home income.
While buying a new life insurance policy, the life insurance companies will always ask you about your existing life insurance plans. The insurer may reject new life cover if your existing life cover equals or exceeds this limit.
Another factor to keep in mind is the effort and time needed for managing multiple policies. Also, your total premium cost may rise if you are buying similar policies with some time gap. If you are investing in multiple life insurance plans for any reasons, you can use E-insurance account to manage your policies in one place.
E-insurance account is similar to a d-mat account, where you can see and manage all your insurance policies. E-insurance account enables you to organise your multiple life insurance policies and you can even file service requests except for claim settlement.
Before we close, there are many articles claiming that multiple life insurance policies provide you with a hedge against the possibility of claim rejection by one insurer. While there could have been some truth in this statement, modern life insurance companies in India are well connected.
Modern technology helps them not only underwrite risks more accurately but also settle the claims faster. Therefore, if one insurer finds enough reason to reject your claim, the possibility is that the other insurer will follow the suit.
So, the best hedge against claim rejection is not multiple life insurance plans, but accurate disclosure of relevant information.
Your reasons for buying multiple insurance plans may differ, but at the end of it your objective should be relevant and clear, such as meeting your financial goals.
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