Increase/Reduce Cover with Age:
As you age, two things happen:
- Your family and income grow, which means you can buy more insurance
- Your life insurance needs to be reduced 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 coverage, you can easily choose to increase the life coverage instead of reducing it.
Now, there are two ways you can achieve this:
- Buy a new term life insurance as your eligibility and responsibility (family) grows
- Buy a term insurance plan which allows life-stage increments in sum assured.
We at Canara HSBC Life Insurance offer the, iSelect Smart360 plan which, offers you the second option. The life-stage increment option can save a lot of hassles for you and your family’s growth. Some important points to note:
- Avoid the full underwriting process as an existing customer
- Enjoy a discount on the premium
- Increase life cover upon three crucial life stages:
- Marriage
- 1st Childbirth
- 2nd Childbirth
Thus, you do not need multiple life insurance plans to care for at least your growing life cover needs.
Limit of Human Life Value:
You can buy as many life insurance policies as you want, but you should consider the limit imposed by the human life value (HLV) estimate. HLV is based on your income and can go up to 20 times your 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 a new life cover if your existing life cover equals or exceeds this limit.
Cost of Managing More Policies:
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 buy similar policies with some time gap. If you are investing in multiple life insurance plans for any reason, you can use an E-insurance account to manage your policies in one place.
An e-insurance account is similar to a d-mat account in that you can see and manage all your insurance policies. An e-insurance account enables you to organise multiple life insurance policies, and you can even file service requests except for claim settlement.
Hedging Against Claim Rejection:
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 claims faster. Therefore, if one insurer finds enough reason to reject your claim, the possibility is that the other insurer will follow 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.
