Multiple Term Insurance Policies
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Creating a provision for term insurance is seen as a broad choice to develop a future corpus. However, it is much preferable to get many term policies. However, you must be open and careful while selecting more than one term insurance coverage. Before choosing one of these programmes, you must carefully weigh the benefits and drawbacks, as well as the terms and conditions.
Term insurance has grown in popularity due to its low and inexpensive premium rates. A single term plan may be inadequate at different phases of life when financial demands vary. As a result, it is recommended to keep many term insurance plans for a stronger long-term financial grasp. You may buy as many term insurance policies as you wish, based on your needs and premium-paying ability, as long as you declare all prior term insurance policies when applying for the next one.
This is the sole requirement that must be met when you purchase a new term insurance policy. The underwriter evaluates your total life insurance need, takes into account your past life insurance coverages (term and other life insurance plans), and then determines how much coverage you can get. To summarise, you may have numerous Term Insurance Plans in India as long as you have reported them all. Otherwise, your claim may be dismissed due to non-disclosure or misrepresentation of relevant information. There are several advantages to having multiple term insurance policies. Let us go through them in detail so that we can comprehend.
The Advantages of Having Multiple Term Insurance Policies
Different stages of development:
The financial objectives and priorities fluctuate depending on the period of life. The goals of a 25-year-old will almost likely vary from those of a 40-year-old. Under typical conditions, the early phases of life will be devoted to family formation, and later in life, the emphasis will move to children’s education, post-retirement preparation, and so on. As a result, picking a term plan based on the state of existing obligations that varies over time is not only critical, but also matches with your changing demands.
Coverage is more limited:
Multiple term insurance policies provide more coverage and are less expensive than a single term plan, with a bigger amount guaranteed. If the coverage amount is large, it is also a good idea to diversify term policies among various insurers. It is also critical to report current term plans when purchasing new ones.
lowering the possibility of claim rejection or delay:
The risk of claim denial or delay is dispersed among numerous insurers when you have various policies. Although you are urged to provide all factual information at the time of policy implementation, there may be numerous occasions when crucial facts are omitted inadvertently. As a result, the claim is rejected or delayed. However, with many insurers, the likelihood of having the same issues in all plans is low, lowering the probability of claim denial or delay.
Advantages of adding more riders:
When you purchase more than one term insurance policy, you may take advantage of several types of riders. The different riders might provide extra advantages to having several term policies. Different insurance policies provide different extra perks, so having numerous plans gives you a vast bouquet of benefits to select from!
Benefits have been enhanced:
Every year, the whole life insurance business changes and evolves. The previously offered advantages are always being innovated and improved. As a result, an older term insurance plan would have less benefits than a new variety from the same or another insurer.
However, most insurers continue to upgrade their older term plan versions, although they are unable to improve the benefits that were granted initially due to a change in payment. As a result, a freshly published term plan would undoubtedly be an improved version of the previously chosen plans. This is when the advantage of purchasing many term insurance policies becomes clear, as there is a noticeable increase in the benefits and coverage features with price competition!
Increased borrowing capacity:
Another advantageous feature when obtaining another term plan is the borrowing facility. After you purchase your first term insurance policy, you may incur a company loan, a house loan, or any other longer-term debt. The only reliance on a single term plan may inadvertently deprive its dependents of its inevitable future rewards. That is why a supplementary term insurance policy with a face value equal to the unhedged loan amount is necessary.
Consider the following:
The main issue with having numerous term policies, particularly from different insurers, is service. This includes everything from premium payment to claim.
So, if you have numerous term policies, make sure you pay all of their premiums on time to keep your insurance from expire.
Tip: Set up an automatic debit from your credit card or bank account to ensure that your premium is paid on time and without your assistance!
Gather all of your claim documentation in one location and keep your nominee (s) updated.
Tip: Keep all papers in a single file and the contents of all documents properly kept in your eInsurance Account (eIA), with your nominee (s) informed on the password so that they may access it in the event that anything awful happens to you.
Servicing, such as address changes, might be difficult due to many lines of contact for different insurers.
Tip: Once again, updating your address in your eIA will automatically update all of your insurers.
Understanding the Value of Human Life:
Any term plan’s total insured cannot exceed your Human Life Value as determined by the underwriter. It represents the buyer’s monetary worth based on his or her income, obligations, and savings. Thus, before issuing your term insurance plan, the underwriter will evaluate your overall life insurance coverage across all policies.
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The thumb rule is an easy approach to comprehend HLV. For example, a person aged 18 to 30 years old may get 25 to 30 times their yearly income from all sources. In addition, individuals aged 30 to 45 may choose coverage equal to 20-25 times their yearly income, while those aged 45 to 60 can have coverage equal to 15-20 times their annualised income.
This is only an example to help you understand and is not a hard and fast rule. Each insurer’s underwriter and actuary would have its own internal calculations, and this coverage would apply to all of the main insured’s life insurance policies! So, in order to acquire your second, third, fourth, or nth Term Plan, you must provide documentation of your previous plans (along with riders as they increase aggregate coverage) as well as your income data to the insurer’s underwriting department for consideration in order to have the policy granted!
From the preceding discussion, it is clear that not only can you own many term insurance policies, but you can also pay their premiums and keep them in force until the conclusion of the policy term, allowing them to come in useful in times of need.