Devesh wanted to purchase a life insurance plan, which would provide financial security to his dependents in case of his sudden demise. But he often pondered what would happen to his family if the claim of death benefit was rejected by the insurance company. He often thought of purchasing multiple term insurances to allay his fear. Then one day, Devesh had a long conversation with his brother-in-law, a financial consultant. The latter told Devesh that he could purchase multiple term insurances provided his total sum assured from all policies was not higher than his Human Life Value.
Based on certain conditions, there is no legal impediment for claiming multiple term insurances. Before opting for multiple term insurances, one must understand the features of a term insurance policy.
What is a term insurance policy?
A term insurance policy is a specifically designed life insurance policy that protects an individual’s family and provides them financial security in case of any eventualities. Like most insurance plans, an individual pays a premium for a given term. If the individual passes away during that term because of an accident or due to health reasons, the nominee is assured a death benefit equal to the value of the plan. The premiums are calculated on the basis of the health conditions, the life expectancy and the age of the individual. Insurers often ask the individual to conduct a medical check-up prior to finalising the policy.
Benefits of term insurance policy: Along with providing death benefits to the policyholder’s family, a term insurance policy offers tax-saving benefits under Section 80C of the Income Tax Act. Premiums up to 1.5 Lakhs including for the individual, the spouse, and the kids can fall under this category subject to other investments made by the individual. Death benefit pay-outs to the nominee are exempt from tax under Section 10D.
For claiming multiple term insurances, any individual has to fulfill the following conditions:
- Sum assured of multiple term insurances cannot exceed Human Life Value (HLV): Human life Value is the monetary value of an individual’s life based on income, savings and liabilities. It is also the monetary value which denotes the loss of income and increase in liabilities that an individual’s family would face in the case the individual’s sudden demise. HLV allows any policyholder to ascertain the amount that would be required as life cover, in the case of the policyholder’s sudden death. A HLV calculator determines the best life cover for any individual on the basis of the individual’s profile, savings, liabilities and income. Most insurance companies allow an insurance cover which is 10 times the annual income of the individual. If the individual’s total income is eligible for higher coverage, the subscriber can opt for multiple term insurances. The policyholder, however, has to provide proof of annual income to avail multiple policies. But the sum assured of all the policies cannot exceed the HLV.
- Health of the individual:If an existing policyholder wants to purchase another life term policy, then another medical test is required. If the policyholder is in good health, besides being in the suitable income bracket, then the benefits of multiple term insurances can be availed.
- Declaration of all existing term insurances:If an existing policyholder wants to purchase another life term policy, one has to declare all the previously purchased policies to the new insurer. Failure to declare the existing term insurances would result in rejection of claims. While claiming multiple term insurances, a standard policy is followed by insurance companies based on the guidelines of Insurance Regulatory Development Authority of India (IRDAI).
Benefits of multiple term insurances: Multiple term insurances allow an individual to subscribe to an insurance plan based on the milestones reached by the dependants. These include, children’s education, children’s marriage or any other requirement in the life of the subscriber’s dependents. Other benefits of multiple term insurances are:
- Helps to avoid claim rejection: Having multiple term insurances can help a policyholder to avoid the risk of claim rejection in the case of the individual’s sudden demise. Even if one insurance company rejects the claim, the policyholder can always have another insurer as an alternative. This is one of the key benefits of multiple term insurances.
- Death benefits from multiple insurers: In the case of sudden demise of the policyholder, the dependent receive death benefits from multiple insurers. This ensures that the dependents of the policyholder have ample financial resources at their disposal.
- Freedom to select between different insurers: An individual can select insurers with high claim settlement ratios to ensure that one does not have the risk of facing rejection of claims. Different insurance companies have varying claim settlement ratios for term policies. If one has previously purchased a plan, and the insurer’s annual statement reflects a poor claim settlement ratio, then one can purchase another policy from a different insurer.
Thus, multiple term insurances safeguards the interests of the policyholder in the best possible manner. Future Generali Flexi Online Term Plan is an affordable and flexible plan that covers your family's financial future in your absence.