Term insurance is known to be one of the simplest and most affordable forms of life insurance. When you buy a term insurance plan, you ought to ensure that you are doing so for the right reasons. Primarily, your term plan should suffice to fulfil all the liabilities you may leave behind, as well as protect your loved ones from financial distress.
Is a single term insurance plan enough for this? Or should you split your term life insurance? Before answering these questions, ensure that you are well aware of what term insurance is, and how it works.
Term life plans are simple life insurance plans that offer you cover for a limited duration, from as low as 10 to about 40-45 years. These plans are known to be affordable, which makes them suitable for most age groups looking for low-cost life insurance options.
When you buy a term life plan, you are getting a life cover with which you can protect your loved ones from financial distress, if they were to face the possibility of your untimely demise or other such situations covered by your policy. Before you buy a policy, ensure you use a term insurance calculator to get a clear idea of what you may be expected to pay for the same.
Once you know what term insurance is, and what purpose it serves, you can decide whether to split your term life cover or not.
What Does Splitting Term Insurance Mean?
Splitting term insurance refers to buying multiple term insurance plans. There are several reasons why a person may choose to do so. For example, imagine a person who has a child in school as well as a home loan to repay. This person could split their term insurance. They could buy one term policy to help their loan repayment, and another one to support their child’s education.
Should You Split Your Term Insurance?
Whether you should split your term plan or not is a decision to be made after careful consideration. If you already have a term life cover, you ought to consider whether you need an additional life cover. Assume you have purchased your original term cover a few years ago with your family’s basic needs in mind, and you now have a car loan that will need to be repaid for the next decade. In the possibility of a future without you, your family will need to take care of themselves, as well as repay the vehicle loan. Your original policy may not suffice to cover both these needs. In such cases, it is ideal to get another term plan, and thus, split your term insurance.
On the other hand, if you do not already have a life cover, you may not need split term insurance. You can carefully assess your needs and cover them with a single term plan. You may use a term insurance calculator to get a better idea of how much the plan will cost you for the sum assured you seek.
Before you split your term insurance, here are a few things to consider.
- Multiple Premiums
The number of policies you buy is the number of regular premiums you will have to pay. This may prove to be stressful for your finances. Thus, before you split your term insurance, consider whether it is a financially sound decision to have to pay multiple premiums.
- Multiple Claims
Either you or your survivors (as the case may be) will require to file multiple claims when it is time to do so. The processes for these claims may have to be initiated simultaneously. This may prove to be tedious for the people who have to file these claims and be responsible for receiving the benefits.
While policy documentation is much easier in today’s times, especially now that the processes are online, doing it for multiple policies can be quite a hassle. When maintaining split term insurance, you may have to take care of multiple documentation processes and ensure that everything is up to date.
Having split term insurance is one of the ways to ensure all potential future needs of you and your family are met. However, it is also necessary to keep the premiums of your split term insurance in check. Ensure that the premiums you have to pay for your multiple term insurance policies don’t burn a hole in your pocket today.