Can I Claim More than One Life Insurance?

Can people own multiple cars? Absolutely. Similarly, individuals can also purchase multiple life insurance policies. A life insurance policy is an essential tool that offers financial support to your family when you’re not around anymore. 

With multiple life insurance policies, you can significantly increase your coverage and enhance your family’s financial security. In the unfortunate event of your untimely demise, your beneficiaries can make life insurance claims to receive the benefits from these policies, giving them the means to replace lost income, manage expenses, and fulfil outstanding obligations.

This article will explain what it means to have multiple policies and whether you can make multiple life insurance claims.

What Does It Mean to Have Multiple Life Insurance Policies?

Having multiple life insurance policies means an individual holds more than one life insurance policy, each paying out a death benefit to beneficiaries upon the insured’s death. This differs from having additional coverage options, such as riders or add-ons, within a single policy.

There are several reasons why individuals choose to have multiple life insurance policies. Some may seek higher coverage than what a single policy can provide, while others may want to diversify the risk among different insurers. Besides, changes in life circumstances, like starting a family or acquiring significant assets, may prompt the need for additional coverage.

Let’s understand the difference between holding a single policy and multiple policies. Suppose Shreya has multiple insurance policies while Gautam has a single policy.

From the table above, it may look like Shreya saved Rs. 4,50,000 on the total premium paid compared to Gautam and secured a higher cover amount ₹65Lakh. However, the catch is that Shreya was covered for only 10 years. Even if she purchased different plans every 10 years, in any given duration of 10 years, she had a lesser cover amount than Gautam. In the above case, from the 1st to 10th year, ₹15 Lakh followed by ₹20 Lakh and ₹30 Lakh in the duration of 11-20th year and 21st to 30th year, respectively.

Hence, breaking your term plan into multiple plans in parallel or year over year is not wise.

One popular approach is to hedge coverage by opting for multiple plans from different insurers for the same duration. However, this is also not recommended because it may result in overspending. An alternative to this is to have a single plan with an appropriate process, ensuring less claim declination from one insurer and increasing the coverage amount as your needs evolve; it would be a much more valuable and cost-effective strategy for risk mitigation. 

Legality of Multiple Life Insurance Policies

There is no legal restriction on holding multiple life insurance policies as long as the policyholder discloses all existing coverage during the application process. Insurance companies require full disclosure to assess the risk accurately and determine appropriate premiums. 

Failure to disclose existing policies could be considered insurance fraud and may result in policy cancellation or denial of multiple insurance claims.

Also, many people try to maintain multiple policies to safeguard themselves from rejection from one or more insurers. However, it must be understood that insurance claim rejection is not just the function of the insurer from whom you are taking your plan. It has more to do with the details provided by you while buying a term plan or the conditions of the plan. So, multiple life insurance plans should not be taken to hedge against the claim rejection. In today’s digital world, it is very much possible to research and find the right term plan and provide your personal and medical details transparently to insurers to avoid any last-minute surprises. 

Multiple Life Insurance Policies: Pros and Cons

Here are some pros and cons of holding multiple life insurance policies.

Pros

• Enhanced Coverage – Multiple policies can provide a higher level of financial protection for beneficiaries, ensuring that their needs are met in the event of the policyholder’s untimely demise.

• Financial Security – Multiple policies provide an added layer of financial security, ensuring that beneficiaries are well-protected in the event of the insured’s death.

• Flexibility – With multiple policies, you can tailor coverage to meet specific needs, such as term insurance for income replacement and whole life insurance for asset accumulation.

Cons

• Complexity – Managing multiple policies can be more complicated, requiring careful tracking of premiums, coverage amounts, and policy terms.

• Cost – Holding multiple policies typically results in higher cumulative premiums, which can strain your financial resources.

• Over insurance – If not carefully planned, you may have more coverage than necessary, leading to unnecessary expenses and potential challenges during the policy claims process.

Key Considerations Before Buying Multiple Life Insurance Policies

Before purchasing multiple life insurance policies, consider the following:

1. Financial Goals and Needs Analysis 

Thoroughly assess your financial goals and needs to determine the appropriate amount and type of coverage required.

2. Policy Coordination 

Ensure that all policies complement each other and align with your financial plan, avoiding redundant or overlapping coverage.

3. Disclosure Requirements 

Discuss all existing policies with insurance providers to avoid potential conflicts, fraud accusations, or policy claim denials.

4. Long-Term Financial Plan 

Consider how multiple policies fit into your long-term financial plan and whether they align with your financial goals.

Key Takeaways

While multiple life insurance policies offer added financial security, it’s crucial to carefully evaluate your needs before pursuing this path. Having a single policy adds simplicity in terms of managing your plan as well as the claim process. Maintain full transparency with providers about existing coverage to avoid conflicts. By analysing the pros and cons and considering policy coordination and long-term affordability, you can make informed decisions that line up with your long-term financial goals and provide peace of mind for yourself and your loved ones. 

You can also consider platforms like PhonePe to explore and select the ideal life insurance policy that best suits your needs.