Should you buy a second life insurance policy in 2024?

These days, it’s imperative to have term life insurance because it will provide for your family’s financial needs in the event that you pass away. However, does it make sense to buy another life insurance policy to cover all the risks? We’ll examine the benefits and cons of owning several term life insurance policies in this article. This will assist you decide if you need more than one policy or if a single-term insurance policy will be enough for your current family’s needs.

Benefits of Buying Another Life Insurance Policy

Let’s first examine the three benefits of owning another life insurance policy:

• We all can understand that as we grow, our responsibilities increase and this can lead us to re-think about the coverage we once got that was enough for the then responsibilities but will not be able to meet the current and future needs of the family. For instance, at the age of 27, you might not have a family to support and your only liabilities may be your own loans—such as education loans or car loans, in case you have one,—and the term life insurance you require. As a result, not a significant amount of coverage is required. But your obligations go up when you turn 40. Most of the people have families by now, and many may have additional debts such as business or home loans. Therefore, you must make sure that, in case you pass away, your liabilities and your family’s financial demands are addressed. Moreover, the term plan you may have purchased when you were 27 might not be sufficient when you are 40. It is also possible that your spouse had to leave their job because of health issues or obligations to their family. You now have more duties and expenses because you are the family’s only breadwinner. And so do your requirements for insurance coverage. This is where the second term plan can fill in the gap.
• With the help of a second-term life insurance policy, you will be able to cover different risks with different maturity dates. Let’s demonstrate this using a simple example. XYZ, 30, purchases a Rs 2 crore term insurance coverage that would last till he is 65. After their unfortunate demise, the sum assured amounting to Rs 2 crore will be sufficient to meet his family’s future expenses. Additionally, the policyholder owes Rs 50 lakh rupees on a house loan and has an additional fifteen years to pay the housing loan’s interest. For this, XYZ purchases a second-term life insurance policy for Rs 50 lakh for a period of 15 years to ensure their responsibility doesn’t lag behind even when they are not around.
• Your family can always rely on the second claim in case the first is denied. Insurance companies often do not reject term plan if all the information is correctly declared. However, there are always going to be exceptions, and the policyholder’s family’s claim could be turned down. In such a scenario, the family of the policyholder might rely on the sum assured for other policies after his or her death. So if the claim is rejected by one insurance company, but accepted by the second, then the entire sum is not lost.

Drawbacks of having multiple term life insurance policy

As there are benefits to having many policies, there are drawbacks as well. Let’s examine them:

• Paying premiums for various life insurance policy requires you to keep tracking the due dates of those policies, among other things. This is undoubtedly an additional inconvenience.
• Even during the claim process, the family members have to submit the claim for the sum assured at multiple places and this could put them in further trouble.
• You buy a term insurance plan of Rs 1 crore at the age of 27, and the premium amount for the policy would be Rs 1200 per month. In case after some time, you decide to buy a second policy of Rs 1 crore at 35 after you get married and have children. And the premium for the second policy would be Rs 1800 per month. Hence, for maintaining two policies, the total premium amount you will be required to shell out is Rs 3000 per month.
• Having two-term insurance policies will certainly increase your cost. Let’s understand this with a better example. Assume that at the age of 27, you purchase a Rs 2 crore policy, you must pay a monthly premium of Rs 1,800. In the second scenario, you purchase a Rs 1 crore term plan at the age of 27, with a monthly premium of Rs 1200. Now that you’re married and have kids, you choose to purchase a second policy for Rs 1 crore at the age of 35. Additionally, the second policy would have a monthly premium of Rs 1800. Therefore, you will need to pay a total of Rs 3000 per month in premiums to retain two policies.

Important Aspect: In case you own multiple life insurance plans, it is crucial to address the restrictions associated with each policy. According to the restriction, the total coverage amount across all of your plans cannot exceed the amount of money you would make in the future. It is called human life value in technical terminology. When someone applies for a second life insurance plan, insurance firms make sure to thoroughly examine that.

So, we are saying

Now, it is always advantageous to have two-term insurance policies rather than one if you balance the benefits and drawbacks and take into account the fact that your financial demands vary depending on your situation and that you are never able to forecast the future. In summary, it is a good idea to evaluate your term plan requirements on a regular basis—ideally, every ten years. Additionally, you should purchase a second-term insurance plan to address any gaps in your coverage if you believe that it is necessary.

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