Can I Buy Multiple Term Insurance?

If you are a regular user of mobile phones, you will relate to this. To get uninterrupted services and access to various features on your phone, you regularly recharge your number with different plans of your choice, right? Like, you might recharge your phone number with a plan that gives you 2 GB of data per day along with unlimited voice calls.

But what if your per-day limit of 2GB of data gets exhausted before the day ends? What do you do in such a case? You prefer buying another short plan to get uninterrupted services.

Similarly, term insurance may not be a one-time affair. People might require multiple plans to satisfy their needs at different stages of their life. But can you buy more than one term insurance plan? Let’s find out - in this article.

What is Term Insurance?

Term insurance is an agreement between you and your insurer to pay the cover amount to your nominee in case of your unfortunate death. You are required to pay premiums to keep the coverage active.

Benefits Of Term Insurance Plans

• Term insurance is one of the most effective ways to safeguard the financial future of your family. All you have to do is pay your premiums duly to keep the coverage active. If you pass away during the policy term, your nominee will receive a set sum of money as the death benefit.
• Term insurance policies are pure risk covers and are considered to be cost-effective policies.
• Term insurance is flexible and can be tailored to meet your needs. - You can customise the premium payment frequency, the premium payment duration, how the claim amount will be disbursed, add riders, opt for the increasing/decreasing cover feature, etc. to make the plan wholly yours
• Under the Income Tax Act of 1961, you can avail of tax benefits* on both the premiums paid and the claim amount received. Let’s take a look at them.
  Section 80C: You can get tax deductions up to Rs. 1,50,000 for the term insurance premiums that you pay annually.
  Section 10(10D): The claim amount that your family receives in case you pass away during the policy term is exempted from tax.

How Does Term Insurance Work?

A term insurance plan is a pure risk protection plan that provides your family with a sum of money in case of your unfortunate death. This money can be used to fulfil their needs without compromising their lifestyle and dreams.

However, keep in mind that term insurance will not give you any returns if you outlive the policy duration. The policy will terminate at maturity.

Can You Take More Than One Term Insurance Plan?

Yes, it is very much possible to invest in multiple term insurance plans at the same time. There is no restriction on the number of term insurance plans you can buy.

Term insurance is a personal product and every individual might have different life priorities and goals to fulfil depending on different stages of their life. So, when you are young with lesser financial responsibilities, one term insurance plan might suffice your family’s needs. But, as you grow older, so do your responsibilities. You might get married, you might have children, you might have taken a loan, etc. In this case, you might need to upgrade your life cover by purchasing additional term insurance plans to give your loved ones the financial security they require.

For instance, Raj bought a term insurance plan when he got married 3 years ago. Now, he has a child and has also taken a home loan. Raj will need to purchase another term insurance plan the cover amount of which should accommodate his family’s growing needs - including his child’s education/wedding expenses, the remaining home loan amount, etc.

But, if you plan on buying multiple term policies, remember that you will need to inform your insurer about your existing life insurance policies. Generally, insurers calculate the Human Life Value (HLV), i.e., the upper limit of the life cover that you can own.

👉Your maximum cover eligibility will be calculated based on factors like the age at which you buy the policy, your income, etc. This is generally done by multiplying the income you earn by certain age-related factors such as 20x or 25x.

👉And, if you already have a life insurance policy, the cover amount of that policy will be subtracted from the amount of term insurance for which you are eligible.

Let’s understand this better with an example! Juli is 25 years old with an annual income of Rs. 15 Lakhs. So the maximum cover amount she is eligible for can be calculated as: 15 Lakhs X 25 = Rs 3.75 Crores.

If Juli already has a life insurance policy of Rs 1.75 Crores, the maximum sum assured that she will be eligible for will be INR 2 Crores (3.75 Crores - 1.75 Crores). She can opt for the desired coverage under one plan or multiple term plans. The aggregate sum assured across all term insurance should not cross this threshold.

Note: The factors considered in the examples are for illustrative purposes only. The actual factors used may vary.

Let’s look at some of the benefits that multiple term insurance plans can bring along

Benefits of Multiple Term Insurance Policies

Here are the key benefits of having multiple term insurance plans -

Option For Increased Coverage

Ensure your family's present and future needs are adequately covered by a sufficient sum assured. Don't forget to consider inflation and how expenses and financial responsibilities tend to grow over time. If you're 40 and still relying on the term insurance policy you got at, say, 25 - it may no longer be enough. Opting for a multiple term insurance policy can be a wise decision in such circumstances to address your increasing responsibilities and coverage needs.

Benefits Accruing Due To Evolved Policies

The insurance industry is always changing, with new improvements introduced each year. This means that older term insurance plans may have fewer benefits compared to newer ones. Insurers often upgrade their earlier plans, and these new insurance plans can be upgraded versions of the ones you already chose, with improved benefits and coverage at competitive prices.

Easy To Repay Loans

Many people rely on loans or EMIs to achieve their dreams, like buying a home, studying abroad, or having lavish weddings. However, depending solely on one term insurance plan may not adequately cover all your financial responsibilities with just one payout. This could potentially burden your loved ones. It's crucial to have extra term insurance coverage equal to your outstanding loan amount.

Why Should You Buy Multiple Term Insurance Policies? - 3 Things You Should Know!

Let’s understand the 3 significant aspects that’ll support your decision to buy multiple term insurance plans

The Total Sum Assured Of Multiple Term Insurances Cannot Be More Than The Human Life Value (HLV)

You have the freedom to purchase multiple term policies, but it's important to be mindful of the limit set by your Human Life Value (HLV) estimate. In term insurance, HLV stands for "Human Life Value." It is a method used to calculate the amount of life insurance coverage needed based on an individual's income, expenses, financial obligations, etc. The sum assured amount of your term insurance plans should not surpass your HLV. Insurance companies carefully examine your background when you apply for a second life insurance plan. They will review all your life insurance applications before issuing you a term insurance plan.

It Is Significant To Declare All Existing Term Insurances Plans

It's crucial to keep all your important documents together for each of your term policies. If you're an existing customer looking to buy another term life policy, you must declare all the policies you've previously purchased to the new insurer. Failing to do so could lead to your claims being rejected. Additionally, insurers have their own internal calculations, and this cover applies to all life insurance plans. To smoothly select your second, third, fourth, or nth term plan, you'll need to provide the insurer with evidence of your previous plans, as well as your income and other details. This ensures a hassle-free experience down the line.

Managing Multiple Policies May Be Hasslesome

Having multiple plans means you'll have to put in extra effort to pay multiple premiums on time to avoid your policies lapsing. You'll also need to keep your insurers updated if there are any changes in your residential address, and the like. You don’t want this hassle, so make sure you're prepared before going down this path. Apart from the hurdles you'll encounter in managing multiple policies, your family members will also face their fair share of challenges when it comes to making claims. They'll have to go through the process multiple times, submit two sets of documents and follow up with multiple insurers individually - all while dealing with the grief of your loss.

Conclusion

We have reached the end of the article! We hope it gave you important insights into a term insurance plan and whether you can purchase multiple term plans. Always make sure to understand your family’s needs and objectives before choosing the cover amount and benefits under your plan/s.