Term insurance is often considered a crucial part of a financial portfolio by professionals. But have you ever wondered why this is the case? There are several reasons for this, including the fact that it is the most basic type of life insurance policy available on the market. So, let’s take a closer look at what term insurance means.
What is term insurance?
Term insurance is a simple, easy-to-understand insurance plan where you pay a fee in exchange for a life insurance policy (guaranteed sum insured). If you die during the term of the policy, the policyholder receives the insurance payment amount specified in the policy. And if you survive the term period of this policy, you will receive nothing.
In response to changing customer demands, insurance companies have offered term insurance with maturity benefits, called term plans with return of premium. The operational side of these plans is as old as any traditional term plan, except that if the policyholder survives the term of the policy, they receive the full amount of the premiums paid to the expiry of the policy. For this reason, term insurance with refund of premium advantage has a higher premium than standard term coverage.
However, just as it is essential to obtain term insurance, it is also essential to select the appropriate sum insured to ensure that the long-term goals and monthly costs of your family member are met in accordance with the future inflation. However, estimating the amounts needed in the long term is tricky. And, because term insurance policies do not have an add-on facility like health insurance, policyholders end up buying many term insurance plans according to their needs and having broader coverage. for the secure future of their family members. When taking out a new temporary insurance contract, the policyholder must declare the current temporary insurance contracts.
Now let’s understand some pros and cons of buying multiple term insurance policies and whether it’s worth getting multiple term insurance policies.
The Benefits of Buying Multiple Term Insurance Policies in India
Purchasing many term insurance policies from different insurers offers a variety of benefits, features, inclusions and limitations. Therefore, if you do not obtain the required benefit from one insurer, you can acquire it from another and meet your needs.
If you want more coverage, buy many term insurance plans from different insurance companies may be the best option as a term plan with a higher level of cover of Rs 1 crore may be delayed. A claim for a lower sum, on the other hand, can be easily authorized.
Choosing more than one term plan can also be advantageous because the guaranteed authorized sum can differ depending on the underwriting policies of each insurance provider. For example, if the underwriting does not allow Rs 1 crore of the insured amount due to health issues, you can select many term insurance policies to get the necessary insured amount.
Suppose the policyholder is overwhelmed with having to pay premiums for numerous term insurance plans. In such circumstances, they could redeem one or more plans without losing the benefits of all term plans.
Since the insurance market is constantly changing and expanding, another advantage of purchasing various term insurance plans is that you will receive the latest benefits and features. For example, term insurance purchased ten or twenty years ago may be insufficient for your current needs or may not include new features such as spousal coverage, child benefit rider, additional payment in the event of death accident, accelerated payments in the event of critical illness or waiver of premiums. advantage. Therefore, depending on your changing financial and personal needs, you can select those that complement and enhance your existing term insurance.
The Disadvantages of Buying Multiple Term Insurance Policies
Multiple term insurance policies offer many benefits, but they are more expensive than single term insurance.
The guaranteed principal amount of the term insurance policy cannot exceed the human life value (HLV) of the policyholder. HLV is a monetary value assigned to a person based on their income, debts and savings. Life insurance companies now offer term coverage based on the age of the insured. A person between the ages of 18 and 35, for example, is eligible for term insurance coverage equal to approximately 25 times their annual income; similarly, a person between the ages of 40 and 50 can acquire the sum insured equal to 10-15 times his annual income.
Simply put, term insurance is a long-term commitment that provides financial security for your loved ones while you’re away. With all of these benefits in place, along with more in the case of term insurance, customers choose to purchase many term insurance plans in order to enjoy more benefits and greater coverage.
Although several term insurance plans provide additional coverage, they are more expensive than a single term insurance plan. Therefore, before acquiring one or more term insurance policies, you should analyze your needs and requirements before deciding to purchase one or more policies. If you want to know more about the different term insurance plans available in the market, go to iiflinsurance.com and select the one that suits you best.