Can I buy A second Life Insurance Policy?

For any individual who is not an insurance industry expert, the first thought that comes to your mind would probably be – “Why should I go for a second life insurance policy when I can get all the coverage that I want with one policy?” But, insurance advisors recommend multiple life insurance policies for your diverse financial objectives for yourself and your family. For instance, a term plan or a Unit Linked Insurance Plan (ULIP) for your child’s higher education, another one for your retirement, a separate one for any other future aspirations that you may have. The article below will tell you why you should purchase a second life insurance policy.

Enhanced financial security

Purchasing a life insurance plan cannot be stressed on enough. Increasing expenses of medical treatments, education and life’s ambitions and aspirations like buying a house, car, traveling the world, soaring expenditures, combined with inflationary pressures, etc. makes it necessary for us to opt for a sum assured that is sufficient to meet the rising costs.

Deciding on the sum assured as per the prevailing expenses would not be able to meet your financial needs and aspirations in the future. Remember, life insurance is not just for you only, it is for your family too. Hence, a limited sum assured will not serve the purpose of purchasing a life insurance. In case, you feel that the sum assured you had opted for may not be able to meet your future needs, it is advisable that you buy a second life insurance policy, preferably a term plan, to supplement the benefits and sum assured.

Helps meet life’s increasing financial goals

Not just meeting increasing expenses, your life goals also change or increase over time. And, with that, your need for an improved coverage increases too. For instance, you might have had certain financial objectives in mind when you had purchased a Term insurance plan while you were unmarried - like retirement plan, travel plans to exotic locales, etc. Your goals changed when you got married, and then again after you had children. When you feel that your current coverage will not meet your increasing financial requirements, a term policy or a Unit Linked Insurance Policy (ULIP) will help you fulfil your new financial responsibilities. You would rather aim at a higher coverage as compared to what you otherwise think you might need to financially secure your family rather than falling short of finances, right?

Separate life insurance policies for different life goals

Sample this. You have a home loan of Rs. 35 lakh spanning over 10 years. Would purchasing a Rs. 1 crore term insurance for a policy term of 25 years be an effective investment? The answer is apparent. For such instances, it is best that you take a term insurance of Rs. 35 lakh to meet your home loan, and meeting other financial goals through separate life insurance plans.

Achieving capital growth

Life insurance policies not only financially safeguards your family against planned and unforeseen emergencies, it also acts as a robust investment plan. One such example is ULIP that is designed as an insurance cum investment plan. It is a smart decision to buy a ULIP or term insurance as your second life insurance plan, if not your first choice, to complement your first life insurance policy. You can even buy multiple term insurance plans for varied financial objectives.

Tax Benefits

Enjoying tax benefits should not be the only purpose of buying a life insurance plan. But, since it does, it is best that you know the tax benefits that you will be eligible for on your life insurance policies. You can avail a tax deduction of up to Rs.1.5 lakh on annual premium payments as per Section 80C, while the maturity benefit is tax free under Section 10(10D) of the Income Tax Act, 1961.

Financial stability despite rejection of a claim

Chances of claim rejection are slender as long as you meet all the eligibility criteria, have furnished the required information accurately, have submitted all the necessary documental proofs, and undergone medical tests, as advised. However, in case such an unfortunate situation arises, you would definitely be in a fix. What then? Multiple life insurance would act as a savior in such situations. One claim may get rejected, but claims made for the same reason against all your life insurance policies wouldn’t. Life insurance plans, as mentioned earlier, secure your financial goals and serve as an effective investment vehicle. What’s more? Diversifying the companies for your life insurance covers will also keep you safe from chances of financial instability due to a claim rejection.

Buying a second or even a third life insurance should be far from being a confusing idea. It is best to keep your insurance plans sorted, one plan for every financial objective. For example, if you are planning for a home loan, child’s education and retirement plan, you should take three term insurance policies, one for each of your set goals. That way, you would be able to customize each of your life insurance plans as per each of its unique financial goal.