Most people often wonder whether having one life insurance policy suffices to secure the future of their loved ones. However, insurance experts advise that buying multiple life insurance policies is a useful financial strategy to diversify your savings and investments. There are life insurance types with investment or savings components like a ULIP, and also some types where only life coverage is provided, like term insurance. With so many types of life insurance out there, buying two different types would lead to getting the best of both worlds.
This article reflects why having a second life insurance policy would prove beneficial in the long haul.
- Increases the financial safety net
When you buy a life insurance policy, you pay premiums as a policyholder to secure the lives of your loved ones. In case of your demise during the tenure of your policy, your nominee will get the sum assured. This sum assured is useful for your family and loved ones for fulfilling their financial needs. Also, consider inflation to meet the rising costs of lifestyle and sudden expenses. The sum assured that you have on your life insurance plan may not suffice the financial needs of the future. The key purpose of life insurance is that your family does not face any monetary strain in your absence. Hence, if a single life insurance plan does not meet your needs, consider buying a second one that would provide additional cover. Based on the stage at which you are in your life, choose which type of second insurance policy you want. Use a life insurance calculator to get an estimate of the premiums payable for the life insurance you choose. It is important to do all the financial calculations and then choose one type that fits your needs perfectly.
- Enables a person to meet their financial goals
Different stages of life have different requirements and life goals. When you are securing the life of your loved ones, you need to consider their future goals, and the funding needed to meet them. For instance, in your early 20s, you may not have any financial responsibilities that impact your life adversely, and you would have chosen a cover accordingly. In the future, when you have a family, you would need a cover keeping in mind your child’s education, marriage, or any other decision that requires huge funds. Buy a life insurance policy keeping your and your family’s upcoming financial goals in mind. If you are planning a retirement corpus, you can consider life insurance with a savings or investment component attached to it.
- Tax benefits
The purpose of a life policy is to provide life cover. Any type of life insurance that you purchase has several tax benefits to offer. After buying two life insurance plans, the premiums that you pay for both of them are exempt from taxes. According to section 80C of the Income Tax Act, you can avail of a tax deduction of up to Rs 1,50,000 annually on the premiums you pay. Also, the sum assured that the nominee receives on the demise of the policyholder is exempt from taxes according to section 10 (10) D of the Income Tax Act.
- Helps in unforeseen emergencies
If you have purchased permanent life insurance, you can keep the same collateral in case you need a long-term loan. This is where your insurance does much more than provide life cover. If your second insurance is a ULIP or any other insurance with a saving or investment component, you are accumulating wealth in the long run. After such insurance policies mature, the policyholder gets the sum assured along with its interests. In case of emergencies, you can tap these funds by availing the feature of partial withdrawals. Use a life insurance calculator for the second insurance you purchase and get an estimate on the premiums you have to pay for your sum coverage.
Having more than one life insurance helps in achieving different objectives in life. It ensures that in each stage of your life, you and your loved ones feel financially secure.