Why you should have Two Term Plans?

Term Plans

Can I buy more than one term insurance plan?  Is it legal to buy and hold more than one term insurance policies? These queries are recently posted to my e-mail ID by one reader.  Well, you can apply and hold more than one term insurance policy. There are many reasons for holding multiple insurance policies. Such as hedge against claim rejection, cost benefits, diversify across insurers etc. In this post, we will understand benefits of holding two term plans.

Also Read – Top 6 Best Term Insurance Plans in India 2019

What is Term Plan?

Term Insurance Plan is pure insurance plan that will provide risk coverage to the policyholder. There is no maturity benefit attached to a term plan. The nominee will get a benefit of this policy only in case of unfortunate death of the policyholder. Term insurance plan comes with an accidental rider, premium waiver, and critical illness cover.

Why you should have Two Term Plans?

There are multiple reasons to buy more than one term plans. Few of them are given below.

Extra Cover – You will get extra insurance coverage by opting for two term insurance plans. It will also provide diversification.

Death Benefit – Nominee can avail death benefit from more than one policy.

Hedge against claim rejection – Multiple insurances will act as a hedge against claim rejection. If one insurance rejects the claim. A nominee can still have a chance of claim settlement from another insurer.

Different maturities – You can buy multiple plans with different maturities. One plan could be with longer term while other with shorter term. This will help you to adjust cover according to changing liabilities.

Benefit of additional riders – You can purchase one term plan with additional rider and other without a rider. By this, you can avail the benefits of different key features of insurance policies.

Cost Saving – The cost will be divided into two plans and it may be beneficial to you.

How to Select Best Term Insurance Plan?

You can follow the criteria given below to compare and select best term insurance plan.

(1)    Premium

The first point to check is premium. The premium of the plan should be as low as possible. You can get information about premium online on insurer website. You can also do a comparison on the aggregator website.

(2)   The reputation of Insurance Company

The reputation of the insurance company is another factor while buying a term plan. The insurance company should be capable of managing the fund and fulfilling commitment given on  the policy terms and condition. You should avoid new company while buying a term plan.

(3)    Additional Features

The decision to buy a term plan should follow through an understanding of the product and features offered. You should give additional weight to unique features offered by the company. However, make sure that feature offered by the company is necessary for you or not.

(4)    Claim Settlement Ratio

Another important factor to consider is claim settlement ratio. Claim settlement ratio means a ratio of claim settled by the company in a year. It is recommended to purchase plan with the company offering higher claim settlement ratio. You can get information about claim settlement ratio from IRDA website.

Restrictions

Whenever you are buying more than one term plan make sure to disclose complete information about first insurance policy to second insurance company. Non-disclosure of this information may leads to rejection of claim.

Apart from that there are certain restrictions on holding more than one life insurance policies. The sum assured of policies should not exceed the human life value.

Claiming Multiple Insurance Policies

The claim process of an insurance policy is simple. A nominee needs to furnish complete information along with claim form to the insurance companies. The document enclosure along with claim form varies based on the insurance company.  An insurance company will follow IRDAI guideline and settle the claim within a stipulated time.

Over to you –

Buying a multiple insurance policy seems to be beneficial. However, you need to pay an additional premium for it. It will be difficult to manage multiple insurance policies in terms of premium payment over a period of time.

In the end, I would like to say that there are no restrictions on buying two or multiple term insurance policies. However, in order to avoid claim rejection, you need to share complete information about past term insurance policy when you buy a new insurance policy.

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