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Should You Go Have More Than One Life Insurance Cover?

Adhil Shetty

When your family expands, a single Term Insurance cover may not be enough. In these uncertain times, you and your family would need extra protection. You may plan to buy extra insurance cover, but you may be confused if this is legally possible or a good idea. Why not? Extra protection for your loved ones is always good. Having multiple life insurance is perfectly legal and in many cases is the right thing to do. Here is how owning multiple insurance cover helps

Change In Risk Profile

With age, your risk profile may also change and the sum assured you chose when you began working may look inadequate. Let us understand this with the help of an example. Suppose when you start working and get married, you buy a term insurance of Rs. 30 lakh. After a few years when your family expands, this cover will be inadequate to cover the financial risk of your entire family in case of your untimely death. In such a situation, you have two options.

The first option is to close the existing insurance and buy a new one for a higher benefit. In this case, your premium now will increase. Your insurance premium may go up for maintaining the same level of benefits with an increase in age. Also, since you are taking a plan with a higher sum assured, you will have to pay the higher premium.

The second option is that you can keep the existing one and buy additional insurance cover. In this case, you will pay extra premium only for the additional coverage you’re buying. Even if you add the existing premium, your outflow will be much lower in comparison to the first option.

So, if you have bought two term insurance plans, it is perfectly legal, and your nominee can claim both in case of your death.

Tenure Diversification

Sometimes it may happen that you have taken a 20-year life insurance cover and you realize after ten years that the tenure is too small and you ideally need coverage for more years. In such a case, you can buy another insurance policy for 20 years. It would enhance the life cover for an extra ten years.

New Offerings

Because of increased competition, insurance providers launch new policies with attractive premiums. It is quite natural to take another insurance plan with better benefits and lower costs. So as the insurance marketplace evolves, it’s quite likely for one person to have multiple covers.

What About Claim Processing?

You can claim your benefits from all the insurance policies you have bought. There is no restriction. Moreover, having multiple insurance policies helps reduce risks in a scenario where one claim may be rejected or delayed. Remember that you won’t be around during the claims and your family will have to bear the brunt of any claim being rejected.

A Word of Caution

While having multiple insurance policies is fine, you should not overdo it. For life insurance, you should not plan more than your income eligibility. For example, try and have a cover that’s 10-20 times your current annual income. If you are buying another life insurance cover, then do not forget to mention your existing life insurance detail during the application process.

The writer is CEO, BankBazaar.com