Pros And Cons of Having Multiple Life Insurance Policies

Buying life insurance is an effective and assured way of securing the future of your loved ones. When you buy life insurance, all you have to do is pay premiums for a particular amount of time and the life coverage stays intact. If an unfortunate event leads to your demise, the sum assured from a life insurance policy can help relieve your family’s financial worries in a distressing situation. However, some people may think that the sum assured of one plan may not be enough. For this reason and more, many people buy multiple life insurance policies. 

Experts say that while there are benefits to such a decision, there might be certain demerits as well. We take a look at both the pros and the cons to help you make the right decision. 

Pros of having multiple policies 

• Enhanced assurance 

This is the primary reason for people buying more than one life insurance policy. After all, it is the future of your loved ones that you are securing, and hence, taking extra precautions seems quite wise. Different life insurance providers have different underwriting principles. Their policy wordings may differ too. If one insurance provider were to reject the claim made by your family member based on their wordings, your family can rely on another policy or provider to receive the sum assured. Thus, there is a stronger sense of assurance. 

• A more robust peace of mind 

When you know that there are multiple life insurance policies taking care of the future of your loved ones, you can breathe a little easier. Your peace of mind will to be more lasting . The relief that you get on realising that you have ensured enough funds for your spouse to live a happy, comfortable life, and for your children to pursue their dreams, is unparalleled. 

• Maximised life insurance tax benefits 

A life insurance policyholder can claim tax deductions of up to Rs 1.5 lakhs against their policy premiums as per Section 80C of the Income Tax Act. With multiple life insurance policies, you can make the most of this deduction. The aggregate premium of multiple life insurance policies is higher than the premium of a single policy, allowing you to claim for a higher deduction and maximise your life insurance tax benefits.

Tax benefits are subject to amendments in tax laws. 

• Additional funds

In the unfortunate event of your demise, multiple life insurance policies can help your family immensely since they have various sum assured pay-outs.

Cons of having multiple life policies 

• Increase in life insurance budget 

Having multiple life insurance policies means having to pay several premiums. This can hike up your life insurance budget by a considerable level. To get an understanding of the same, you can use the life insurance premium calculator. After entering all the information and receiving the estimate, you can multiply the estimate by the number of policies you want. The high premium figure may be over the budget for many policyholders. 

• Extra hassle

Though the process of buying and maintaining life insurance has become quite easier in the last few years, having multiple policies may lead to a bit of a hassle. For each policy, you may have to undergo different medical tests, pay different premiums on time, ensure the smooth continuance of each policy, and so on. Undertaking these tasks may seem like a hassle and may prove to be disadvantageous to some. 

What to keep in mind when buying multiple life insurance policies

• If multiple life policies are a necessity for you, consider buying term plans. They have affordable premiums which can make the expense of having to pay multiple premiums a little easier. 

• Along with the life insurance premium calculator, remember to use the human life value calculator. This tool provides you with a value that it arrives at by considering details such as your current and future estimated income, investment earnings, expenses, financial goals, liabilities, and so on. The total sum assured from all the policies should ideally not exceed the figure estimated by the human life value calculator.

• Consult a financial expert before finalising whether to buy life insurance once or multiple times. A good expert will guide you about the merits and demerits of your decision, the tax benefits, and the repercussions on your finances in a detailed manner.