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Should you have multiple life insurance policies?


Should you have multiple life insurance policies?
If not any other product, life insurance is a must-to-have product in one's basket and experts suggest early purchase of a term plan when one begins to earn and has liabilities to take care of. An insurance cover or sum assured of approximately 10 times the annual salary is recommended for a young workforce. However, over the life-term individuals end up accumulating several policies be it life insurance, health insurance or personal accident policies.

Agents can either coerce you into buying one or it could have been bought at your own will. Or sometimes the policy might have been bought for simply entertaining one of the relative who might be a life-insurance agent or in other circumstances to avail of tax advantages.


Arguments in favour of holding multiple life insurance policies

The opt of multiple insurance policies is favored in order to avoid the risk of claim settlement i.e when one insurer refuses to settle the claim on account of some reason, the claim can be settled by the other. So, many a times, a life insurance customer splits his or her insurance cover requirement among several policies in order to ensure lesser issues at the time of placing a claim request. Also, as claim for a larger sum assured value can be rejected in certain cases it makes sense to have a number of policies with smaller sum assured value.

Furthermore, added cover during a person's life-cycle is required to cover certain other investments or expenses. For eg.: Home loan taken can be covered through an additional life insurance cover for covering liability towards the opted loan until the full repayment. So, in case of some unfortunate event when one is not able to discharge his liability towards home loan, insurance cover taken for the same would come in handy.

Also, in the middle life-cycle stage, one would require a higher coverage depending on the liabilities and additional responsibilities, so opt of more life insurance policies is still acceptable and indeed required.


Arguments against such a practice

Multiple insurance policies require you to service multiple premium payments. So, inadvertent opt of several policies without you analyzing your actually capability to serve them could leave the policy lapsed.

Several insurance policies taken from different insurance companies can make you run after several insurance company when making a claim.

Also, as some of the life insurance plans pay you just in case of loss such as the term cover, opt of several term plans and paying indefinitely towards it makes for not a good investment. So, opt for term insurance policies only to the extent of your real need.

Though, section 80C provides you to save on your tax liability through investment in insurance products. To reap in tax advantage in a particular financial year, getting yourself overburdened with respect to servicing higher premium amount towards several insurance policies through the term of policies is not a good idea.

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