Term Insurance

Can I have multiple term insurance?

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By Upstox Desk

5 min read | Updated on January 09, 2025, 12:12 IST

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SUMMARY

Arnika, a 29-year-old professor, has a term insurance plan with a ₹50,00,000 sum assured. Married with two children, she plans to take a ₹35,00,000 home loan next year. Realizing her current coverage is insufficient, she worries her family would only have ₹15,00,000 after repaying the loan if she passed away. Arnika is considering a second term insurance policy but is unsure if it's allowed. Let’s explore whether having more than one term insurance policy in India is possible.

The ultimate objective of having a term insurance policy is to ensure that your family has enough money at their disposal in case of an unfortunate event. As the financial needs and future requirements keep changing, it is critical to review and make changes to the policy periodically.

The pertinent question arises: can you have more than one term insurance? Let us try to answer all the relevant queries on having multiple term insurance policies:

Is it possible to take more than one insurance policy?

The simple answer is: Yes, you can (and must). As your financial responsibilities change constantly, opting for term insurance from different insurers is possible. However, informing your insurer about all the term insurance policies you have taken is always advisable.

Why should you consider multiple term insurance policies?

Having more than one term insurance policy from different insurers can be a good step towards protecting your family’s future. Here are the most popular reasons why you can opt for multiple policies:

  1. You might face life stage adjustments while achieving milestones, such as marriage, parenthood, or becoming a homeowner. With each such adjustment, your financial responsibilities might increase. Hence, it is critical to review and adjust your term insurance coverage periodically.
  2. You can add specific coverage policies such as debt cover to ensure comprehensive protection of your family’s financial needs.
  3. If you are a business owner, it is important to cover different aspects of business liabilities, protecting your personal and business assets separately.
  4. Having more than one term insurance policy can be an excellent tool to protect your family against future claims rejections.

What are the benefits of having multiple term insurance policies?

You should consider the following benefits of having more than one term insurance policy:

  1. It provides your family or beneficiaries with an additional layer of financial security. For example, the first policy can take care of general family needs; the second policy can specifically address mortgage liabilities or children’s education funds.
  2. You have a lot of flexibility with more than one term insurance policy, each tailored for specific needs at different life stages.
  3. If the coverage amount in your existing policy is no longer adequate, it is simple to have another one.
  4. There is an additional benefit of tax exemptions. You not only receive deduction under section 80(C) on the amount of premium paid on all term insurance policies (up to a total amount of ₹1,50,000 per year); any payouts to your family in case of a mishap shall be exempted under section 10(10D) of the Income Tax Act.

What are the considerations of having more than one term insurance policy?

Even though having more than one term insurance policy can resolve several long-term financial planning-related issues, there are a few drawbacks to investing too much in insurance. Here are the most important points you should remember:

  1. Paying premiums for two insurance policies can financially strain individuals, especially those with limited financial resources.

  2. At the end of the day, term insurance is an expense with no real returns if you survive the policy term. Eventually, you must decide how much you can invest in a safety blanket. Furthermore, you lose a good investment opportunity by paying an additional premium for one more term insurance policy.

  3. There is a chance of overinsurance as it is crucial not to exceed the Human Life Value (HLV) with the total coverage amount. HLV estimates the economic loss that would occur in the event of the policyholder's death.

Summing up

Having more than one term insurance policy depends on various factors, starting with your current and future obligations. If you are someone wanting to protect your family’s financial future or have a few dependents, having an additional policy is highly recommended. However, it is always advisable to inform the insurer about the number of term insurance you have.

The potential financial burden of multiple premiums, the complexities of managing several policies, and the risk of over-insurance are significant factors to weigh.

FAQs

Can I legally have more than one term insurance policy?

Yes, it is legal to have multiple term insurance policies to better meet your changing financial needs and responsibilities.

Why might someone need multiple term insurance policies?

Multiple policies can provide enhanced financial protection as life circumstances and liabilities evolve, such as marriage, parenthood, or taking on significant debts like a mortgage.

What are the tax benefits of having multiple term insurance policies?

Premiums paid on multiple term insurance policies qualify for deductions under section 80C, and the benefits received are tax-free under section 10(10D) of the Income Tax Act,1961.

What should I consider before purchasing multiple term insurance policies?

Consider the potential financial strain from multiple premiums, the complexity of managing several policies, and the risk of over-insurance by exceeding your Human Life Value (HLV).

About The Author

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Upstox Desk is a team of expert writers dedicated to providing insightful and comprehensive coverage on stock markets, economic trends, commodities, business developments, and personal finance. With a passion for delivering valuable information, the team strives to keep readers informed about the latest trends and developments in the financial world.

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