There is a common misconception that an individual cannot have multiple term insurance plans. This is untrue as even if you already have one term insurance plan, you are free to buy another one. However, there are some factors to consider before you do so. If you recently have had a salary hike and are considering getting a second term cover, take a look at this article to know what your options are and what precautions you should take to ensure you make the best term life insurance investment.
What is the Term Life Cover?
A term life cover is a form of life insurance that offers a pure life cover. The premium is low as there is no return component. If you die within the policy period, your nominees receive the death benefit. If you outlive the tenure of the plan, there is nothing to expect in return. Many people buy term insurance even when they don't have a high income simply because it is very affordable.
Getting Another Term Plan after Salary Hike
Did you buy your term cover when you had just started working? Did you get a modest cover because that was all that you could afford? And now, after a few years into the job and with a better pay package, do you wish to enhance your life cover? It is a good idea to get another term plan now as with your increase in income, your lifestyle would also have changed. You may have a bigger home loan and your children may be going to a very expensive private school. To cover these expenses, it would be a good idea for you to get another term plan.
Points to Remember Before Buying Another Term Plan
Before you actually get a second term life cover, here are some points for you to ponder over:
- Increase in Life Cover -
Some life insurance companies offer you the benefit of being able to add or increase your existing term life cover. Speak to your insurance provider and see if this option is available. Make an assessment of how much added coverage you need and get your sum assured adjusted accordingly. Your aim is to have the highest possible cover for your loved ones to remain financially secure, so speak to your insurer and see if any adjustments can be made.
- Add Riders -
You can also consider adding some riders to your existing term insurance plan. Riders are add-on covers that help increase the scope of the life cover. For example, you can get a critical illness rider to help secure your health. Then, you can get a disability protection rider to ensure you get coverage if you are left disabled after an accident. Try to increase your protection under the existing plan if that is possible.
- Compare -
If however customizing your existing term insurance plan is not a feasible thing to do, you should go for another policy. But do not buy the very first plan that you come across. Do your research, go over your own requirements and then set out to make a purchase. Compare the available options and then identify the best plan at the best rate. Make a wise and smart purchase that would bring a lot of value to you and your family.
Your aim must be to offer the best and the most substantial life cover to your family members. In case something happens to you, they should remain financially safe.
Advantages of Buying Another Term Life Plan
Here are the main benefits you get when you buy a secondary term insurance plan:
- Higher Coverage -
The first and the most obvious benefit is that you get a higher life cover when you buy a secondary term insurance plan. If you already have a term insurance plan for, say INR 1 crore, and now you get another one for INR 2 crores, your total sum assured would be INR 3 crores and that will offer a better and more appropriate financial protection to your loved ones.
- Higher Chance of Getting the Claim -
If for some reason the claim on one of the term plans gets rejected after your demise, your family can fall back upon the other policy. This creates a double cushion for them and makes your term life insurance coverage more effective.
- Better Relationship with Insurers -
At times, customers have a strained relationship with their insurers. This makes the experience very unpleasant and unsatisfying. If you are in such a situation but want to continue with the plan because it is a good term cover, look to get a secondary plan from a different life insurance company. Choose an insurance provider that is known for its good customer relationship services.
Keeping these points in mind, it can indeed be a good idea for you to invest in another term insurance plan if you now earn more than what you previously did.
Disadvantages of Buying Another Term Life Plan
While you do get some benefits, there are also some disadvantages to be cautious of before you get another term plan:
- More Expensive -
The moment you have two term life insurance plan, you have to start paying two separate premiums. This will push up your expenses and make term insurance more expensive for you.
- Documentation -
You have to undergo the standard application process and submit all the documents needed. This can take time and effort. If you are older and have some lifestyle disorders, your insurance provider may ask you to undergo a pre-policy screening and that can make it a bit inconvenient for you as well.
However, the hassle of “applying” for another term insurance plan is minimal as compared to the benefits of increased coverage. It is better to go through the ordeal than be underinsured. Aegon had once done a campaign called “Kum Insurance Lene ki Bimari” by Irfan Khan in 2008 where they had tried to propagate that underinsurance is as good as no insurance. That is such a lovely and a true concept being delivered with a clear and a concise message!
The Final Word
Keeping all the points mentioned above in mind, it can safely be said that buying another term plan after your income increases is a good idea. However, analyse all the aspects, compare the prices and then choose the best option. Do not be in a hurry to buy a plan as then you may end up with an incorrect or faulty term life insurance coverage.