Buying a life insurance policy is an important financial decision. Most people put a lot of thought into buying life insurance and maintaining it since they assume that they are going to have only a single policy for all their lives. However, there are exceptions to this.
There are people who tend to buy more than one life insurance plan and maintain them simultaneously. But what is the need for multiple policies? Is it legally advisable to have multiple life insurance plans? Before we dive into these details, let’s take a quick look at what life insurance is.
Life insurance plans are a way to secure your family’s future by entering into a contract with the insurance provider. As a policyholder, you are required to pay premiums on time. In return, the policy provider will offer a death benefit to your nominee in the event of a death claim being made. When buying these policies, ensure that you use a life insurance premium calculator to get a better idea of what you can expect from your plan.
Once you understand what life insurance is, it is easier for you to decide which policies are right for you and whether you should buy multiple life insurance plans.
Why Buy Multiple Life Insurance Plans?
Buying or having multiple life insurance policies is legally acceptable. In fact, many people may actively choose to have multiple life insurance plans. Should you do the same? There is no harm in having more than one policy at a time. However, it is crucial to understand why people may opt to do so, and also clearly understand your motivations behind doing the same. Some do it to cover multiple liabilities, some choose to have more than one policy to avail of a range of benefits.
Remember that there are several reasons why a person may want to have more than one policy. Policy decisions are to be made wisely and with the right motivation in mind.
5 Things To Know When You Have Multiple Life Insurance Plans
When buying or having multiple life insurance products, here are five of the most common factors that may guide your multiple policy decisions.
Of the people who choose to have multiple life insurance plans, most tend to do so to cover their liabilities. For example, you may have three loans that you are currently paying back. Of these, one is for a duration of 10 years, while the other is for a duration of 20 years. You may choose to buy a life insurance plan with a term duration of 10 years to cover your first loan, and another with a tenure of 20 years to cover the second one.
Another example is when you want to leave a legacy for your kids so that their dreams are not hampered. Suppose you have two kids; you can buy two life insurance plans. The first plan can have your elder child as a nominee or a beneficiary. The term duration for this plan can be the number of years in which the nominee will reach the age of maturity. Similar arrangements can be made with the second plan to benefit the younger child.
Different Life Goals
Life insurance plans may also be a way to fund your future goals. If you have multiple aspirations in mind that you need financial support for, buying multiple life plans may be a way to create this support. You can buy plans that offer maturity benefits. Through them, you can ensure that your shared life goals are not left unfulfilled, irrespective of what the future holds.
Alter Life Cover with Age
As you grow older, your needs and responsibilities in life tend to evolve. Your family responsibilities tend to increase, but often so does your income. You may want to buy different life plans to cover these evolving responsibilities, as well as to match your changing needs.
Human Life Value Limit
HLV, or Human Life Value, is a term used in the context of insurance. It denotes the value of a person’s future expenses, investments, and liabilities. It is important to ensure that your life cover does not exceed the HLV. When buying any new policy, you may be asked about your existing policy. The insurer may decide to not give you a new policy if the value of your existing policies exceeds the HLV limits.
Shielding Against Claim Rejection
You may be advised to buy more than one policy to cover the possibility of claim rejection by one of the insurers. However, remember that the reason used by one company to reject your claim can also be the reason for another company to do the same. Instead of buying policies to cover the possibility of claim rejection, focus on providing accurate and complete information to insurance companies, so that the chances of your claims being rejected are lower.
Having multiple life insurance plans is a legally available option. However, not everyone should feel the need to do so. Instead, choose any life plan you buy wisely and ensure that it suits your specific needs and wants.