There is no denying the fact that the Coronavirus (COVID-19) pandemic has changed people's lives. However, it has also changed the way they think about their future. There is uncertainty everywhere, a fear of the unknown, and hesitation to lead our lives the way we used to before the pandemic struck. Almost 50 million people have already come in the grasp of the COVID-19 virus and of those; over 1.2 million people have lost their lives1. Even in India, COVID-19 has claimed over 1.25 lakh lives with over 8 million recorded infections2. With the second wave of the virus already hitting Europe, there is a realization that maybe we need to learn to live with the virus for a long time to come.
It is in these circumstances having a backup plan to secure your family's future has become even more critical. This is where a term plan comes in as an affordable and effective way to create financial security for your family. By having a term plan, you ensure that in case of an unfortunate event, your family's financial future is secure. With the right riders, a term plan can also cover you against critical illnesses like heart diseases and cancer if they ever strike. However, a bigger question is whether it is advisable, or even possible, to have more than one term insurance policy.
Before we answer this question, there is a need to understand why one would want to have more than one term insurance cover. There are several benefits of having multiple term insurance policies:
- Additional cover for higher responsibilities: As life progresses, your responsibilities also increase. You may get married, have children, and take loans for your life goals like real estate, children's education, marriage, and so on. With each stage, your responsibilities increase and your existing life cover may not be enough to cover all those in case of an unfortunate or untimely event. Adding an additional term cover at these important stages of your life may come in handy to ensure no matter what the future holds, your family would have enough to face it in your absence.
- Cover different risks and liabilities: There are different stages in life when you take up additional liabilities for a fixed time period. A perfect example is a home loan where you have to pay EMIs for a fixed period, say 20 years. In such a case, taking an additional term plan equivalent to the loan amount with a tenure of 20 years is a good idea. This term plan would last as long as there is a loan to be serviced and would ensure the burden of EMIs is neither passed on to your family, nor does it erode the sum assured of your primary term plan should anything unfortunate happens to you. You can also opt for add-ons like riders for longer tenure depending on your needs.
How much term life insurance cover do you need?
There is no one-size-fits-all answer to this question. The amount of term life insurance coverage you need depends on a number of factors. A good place to start is factoring in the monthly expenses of your dependents. The sum assured must be enough to cover these expenses at the least. Then you also need to factor in inflation, as these expenses would only grow over time. You also need to assess your life goals and events like your children's education and marriage. The term cover you choose must factor in these one-time expenses. Then there is a question of how big a retirement corpus do you want to leave for your spouse to ensure his or her financial stability in case of an unfortunate event.
While this may all sound quite complicated, you could make use of a term insurance calculator like the one available at the Bajaj Allianz Life Insurance website. In just a few steps, this easy-to-use calculator helps you determine an estimate of the amount of insurance that can meet your needs and help you get your family's life goals done. All you need to do is furnish your annual income, the years of employment left, and your monthly expenses.
A good idea is to take separate term policies to cover your liabilities as discussed earlier in this article. You could also divide the sum assured that you arrive at into more than one policy to cover your family against the rejection of the claim.
However, here are a few ways to avoid rejection of your claim:
- Make sure you pay the premium on time. While this may sound obvious, you will be surprised to know that many claims are rejected because of a lapsed policy.
- Ensure you provide the nominee details. Your family would then have to provide documents like a succession certificate to the insurance company in order for them to identify the legal heir(s) of the policyholder and pay the policy benefits. Sometimes, it can lead to disputes and can even result in a claim rejection. Some Insurers do not allow issuance without nominee details.
- Disclose all medical and lifestyle information correctly. While some people might want to hide such information, your family may have to pay for this huge mistake if the death claim gets rejected because of such non-disclosure.
Irrespective of whether you are planning your first, second, or third term life insurance plan, you could consider online term plans from Bajaj Allianz Life Insurance. All you need to do is log in to the website, select a product that suits your needs, submit your details, choose the policy variant, submit the documents, and pay the premium. Voila! You are now covered.
Buying a second or even a third term life insurance is not as complex an idea as many people believe. Having different term life insurance plans for different financial objectives would ensure that your insurance needs are met. For example, you could have one term insurance plan for securing your family's future, another when you are planning to take a home loan, and one for protecting your retirement. That way, you would be able to customize each plan as per the requirements of each specific goal.