Term Insurance
5 min read | Updated on January 09, 2025, 12:12 IST
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:
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.
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:
You should consider the following benefits 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:
Paying premiums for two insurance policies can financially strain individuals, especially those with limited financial resources.
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.
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.
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.
Yes, it is legal to have multiple term insurance policies to better meet your changing financial needs and responsibilities.
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.
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.
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).
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