It is essential to invest in term insurance, as it helps you meet the family’s financial aspirations and needs when you are not around. If you what to understand what is term insurance plan, read on.
A term plan is a type of life insurance policy, which offers high coverage at an affordable premium. You may be curious to know that only one term plan is sufficient or whether you should invest in more policies like these. Here, we will clear your doubt by evaluating the pros and cons of having over one term plan.
Advantages of having multiple term plans
Here are the benefits of investing in more than one term plan.
- Your coverage will increase with the surge in responsibilities
If you have bought a term insurance plan at an early age when your responsibilities and liabilities are minimal, you do not need a high cover. However, with growing age, you may finally settle down, and in the future, you may have to plan for your kid’s financial goals. Besides this, you must be prepared for medical emergencies of your family members, and long-term debts, like a home loan, among other financial obligations. Here, the term plan, which you had purchased when you were younger will not be sufficient. If you are the sole breadwinner of the family, you will need a high coverage to secure the financial future of your loved ones in case of an untoward incident. You can buy a second policy to bridge the gap between your responsibilities.
- Different policies can meet additional requirements or liabilities
Let us take an example to understand this point in a better way. For instance, Rahul, a 30-year-old man, has a term insurance policy with a cover of INR 1 crore till he turns 60. This cover is sufficient to meet his family’s financial needs in case of any unfortunate event. Moreover, Rahul has a liability of INR 25 lakh to pay towards the home loan, where the tenure is ten years. Here, Rahul can invest in another term insurance in India of INR 25 lakh to cover the housing loan expense. Buying a second policy is the best option because if Rahul had clubbed the policy value, he would have to pay the premium for INR 1.25 crore for 30 years. However, as the home loan tenure ends in ten years, there is no need for Rahul to pay a premium for an additional INR 25 lakh cover for an extra 20 years.
- Your second policy can come handy if the claim for one policy is rejected
Your nominees will not face any trouble during the claim procedure if you had mentioned all the necessary details required by the insurer. However, what if the insurer does not approve the claim; in such cases, your second policy can prove useful.
Disadvantages of having more than one term plan
Let us discuss the drawbacks of having more than one term policy to ascertain whether you need a second plan.
- Premiums can be costly
If you have two policies, then the term insurance premium will also be double. Sometimes, it can be tough to pay the premium, especially if you are on a tight budget. For instance, due to the ongoing pandemic, many people have lost their jobs or are facing difficulties in earning profits from their businesses. In such cases, it becomes hard to cope with the payment of two policies.
- It is difficult to maintain multiple policies
If you have more than one policy, it means that you have to take care of many documents and remember the term insurance premium dates and keep track of when these policies will mature. Keeping so many things in mind is a difficult task.
Financial goals and needs will keep changing. Therefore, it is advisable to note down your monetary requirements and objectives after every ten years. Depending on your responsibilities, you can decide whether you need one or multiple term insurance plans in India.
