Is it good to opt for multiple life insurance plans? Interest in insurance knowledge is growing across the country, with more people understanding what is life insurance to cover their financial risks. Many people also purchase several life insurance plans. But should you have more than one life insurance policy?
Ideally, having excessive life insurance policies is not recommended. Each time you purchase a policy, you will be required to provide information on your existing plans. Failure to include all relevant information may result in claims being refused.
Do you require more life insurance?
If one understands what is life insurance properly, then it’s recommended to get term insurance and a supplemental policy to cover family needs when the income and the lifestyle change. It is possible to purchase two or more life insurance plans, but it is entirely up to the policyholder to choose his or her insurance needs and which plan to purchase.
Insurance companies have certain underwriting rules that are based on the insured’s yearly income, age, and ability to pay the premium. When considering the size and demands of the family, one insurance may not be enough to cover all of the needs. A policyholder will be eligible for a maximum total sum insured of 25-35 times their annual CTC when they are younger and up to 10-15 times their annual CTC when they are older. It is usually preferable to maintain enough coverage up to the highest allowable level.
Buying a single life insurance policy in your 30s and anticipating to be sufficiently protected even in your 50s may not be such a good idea. Furthermore, different life insurance plans serve different objectives, and numerous policies can be purchased.
Declare Previous Policies
Experts largely view life insurance as a risk-mitigation tool and a hedging investment. As a result, it is regarded as your Plan B. However, there may be additional advantages, like life insurance tax benefits and collateral for loans.
Remember to give all information about your previous life insurance policies when applying for new ones, since underwriters will need to assess your entire life insurance coverage before issuing your plan. You may also assign each policy to a specific objective to focus your financial planning. As an extra bonus, the life insurance policy would give financial stability to your loved ones in your absence.
Can you make a claim on two different life insurance policies?
A person can submit a claim on all of their life insurance plans up to the qualifying Sum Assured. When filing a claim under numerous insurance policies, your nominee should provide all clear and complete information about all insurance plans purchased by you. Every insurance company has a set of claim settlement processes that they will follow in order to resolve the claim.
Benefits of Multiple Life Insurance Policies
Purchasing numerous life insurance policies has many advantages, including:
Complete financial security
- Having multiple life insurance plans ensures that you are adequately insured. If you have a current plan with insufficient coverage, extra insurance would assist in enhancing your existing coverage and providing you with comprehensive protection. Insurance is utilised as a ‘risk-reduction tool.’ You may always select more policies until you have appropriate insurance coverage.
- Although it is preferable to obtain a high level of coverage at a younger age in order to save money on premiums, this may not be possible for everyone. Alternatively, there might be a lack of aim or awareness. Thus, when your income and financial obligation develop, you can select another life insurance plan to increase your coverage at a later point in life.
- The total life insurance coverage is determined by yearly income, life stage, dependents, obligations, and financial goals. However, the general rule of thumb is that you should have an amount valued up to at least 10-15 times your yearly income.
- You can obtain staggered payouts at different intervals if you specify numerous maturity dates for multiple plans. This also generates several revenue streams that may be utilised to meet your financial objectives’ timescales.
Different plans for various requirements
- Different financial requirements necessitate a different policy. Term plans, for example, are required for income replacement, whereas child plans assist in the creation of a safe corpus for your child.
- If you want to increase your investment returns, you may invest in ULIPs, while pension plans can help you plan for retirement. Because each form of life insurance policy may be used to fund a specific objective, you can build a diversified portfolio that meets all of your financial needs by purchasing various policies.
Increased tax breaks
- The paid premiums are allowable as a deduction of up to Rs 1.5 lakhs. When you purchase many plans, the aggregate premium is larger, providing you with life insurance tax benefits and the opportunity to claim the full Section 80C deduction.
Note: There are two separate income tax regimes which taxpayers can choose from. For some, it may be beneficial to opt for the new tax regime, while for others, it may be beneficial to opt for the old tax regime. For taxation benefits from life insurance policies, one should choose wisely.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
Source link: https://www.financialexpress.com/money/insurance/should-you-buy-multiple-life-insurance-policies/2333692