Insurance awareness is now growing rapidly across the country, with more and more people investing in life insurance plans to cover their financial risks. Many people also buy multiple life insurance policies. But, is it fair? Should you have multiple life insurance plans?
According to Deepak Yohannan, CEO of MyInsuranceClub, there is nothing wrong with having multiple life insurance policies. In fact, if you do your financial planning correctly, you will end up having several life insurance policies.
âYour income keeps changing and you should increase your coverage amount accordingly. In addition, the plans are given on the basis of an income multiplier. You should have adequate term insurance at every stage of life. You have to plan for your retirement and consider investing – for all of this there are insurance solutions you can take, âYohannan told FE Online.
READ ALSO | Is the Maturity Amount of Life Insurance Policies Tax Free?
However, he warned, just like most things in life, not everything that is done in excess is not good. âSo having too many life insurance plans isn’t recommended either. It should be needs based. If there is a requirement, then go for it. Having 15-20 policies can even lead to tracking issues. Also, whenever you purchase a policy, you will need to mention the details of other policies you have. Failure to mention all the details may result in denial of death requests, âYohannan said.
Pay the premium on time
Dhirendra Mahyavanshi, Co-Founder and CEO of Turtlemint, said, âWith increasing age, your financial responsibility would also increase. So opting for a single life insurance plan in your 30s and expecting adequate coverage even in your 50s may not be as viable an option. In addition, different life insurance plans have different purposes and more than one plan can certainly be purchased. But all policies need to be managed with premiums paid on time to keep them in effect. “
Reveal past policies
Experts view life insurance primarily as a hedging investment and a risk mitigation tool. It is therefore considered your plan B. However, there could also be other benefits such as collateral for the loans.
âSo, yes, you can still go for more than one life insurance plan and you should if you think you are underinsured. Remember to disclose all information about your old life insurance plans when choosing the next ones, as insurers should consider your overall life insurance coverage before issuing your plan. In addition, you can opt for an electronic insurance account (eIA) to better manage your policies, âsaid Mahyavanshi.
âYou can also assign each policy to a specific goal so your financial planning is focused. The life insurance protection which is an added benefit would also provide financial security to your loved ones in your absence, âhe added.
Benefits of the Multiple Life Insurance Plan
There are different benefits of having multiple life insurance plans. Such as:
Complete financial protection
Multiple life insurance policies also ensure that you are optimally insured. If you have an existing plan where coverage is not adequate, an additional policy would help supplement your existing coverage to give you full protection. Insurance is used as a “risk mitigation tool” and until you have adequate insurance coverage, you can always opt for additional plans.
âHowever, it is advisable to opt for high coverage at a younger age, in order to be able to save on the premium, this may not be feasible for everyone. Or there could be a lack of intention or awareness. So at a later stage in life you can increase coverage as your income and financial responsibility increases to be properly insured by switching to another life insurance plan, âsaid Mahyavanshi .
READ ALSO | Have more than one health cover? Here’s how cashless refund requests work
Overall life insurance coverage depends on annual income, life stage, dependents and responsibilities, and financial goals. However, the generic rule of thumb states that you must have a minimum of 10 to 15 times your annual income.
If you choose multiple due dates for multiple plans, you can get installment payments at different intervals. It also creates multiple streams of income that can be used to match the deadlines of your financial goals.
Different plans for different needs
Different financial needs require a different policy. For example, term plans are needed for income replacement, while children’s plans help create a secure corpus for your child.
âIf you’re looking for returns on your investment, you can invest in ULIPs while pension plans help you plan for retirement. Each type of life insurance policy can be used to fund a specific goal and so, with multiple policies, you can create a diverse portfolio that meets all of your financial needs, âsaid Mahyavanshi.
Increased tax advantages
Life insurance plans benefit from tax advantages. Premiums paid are allowed as a deduction up to Rs 1.5 lakhs. When you buy multiple plans, the overall premium is higher, allowing you to claim the maximum deduction offered by Section 80C, thus maximizing the tax benefits.