Term insurance is one of the best tools to secure the financial future of your family. It offers a high extent of coverage at a relatively low premium for a specific period (term). Plus, in the event of the sudden demise of the policyholder, it pays a death benefit to the nominee (beneficiary).

But what happens if you have two term insurance policies from two different insurers? Can your nominee claim the sum assured from both companies? Let’s find out the answer - and more.

Can I Claim from Both Policies?

The Insurance Regulatory and Development Authority of India (IRDAI) does not limit the number of term insurance plans a person can hold. Many people opt for multiple term insurance policies to enhance the range of coverage, diversify insurer risk, or align coverage with different stages of life. So, how does it work? Let's break this down!

What are the Pros and Cons of Buying More Than Two Term Insurance Plans?

Refer to the table below to get a hang of the pros and cons of buying multiple term insurance policies:

Pros of Buying Multiple Term Insurance Policies

Changing Coverage Needs With Life Stages

You may have started with a ₹50 lakh cover when you were in your 20s. But as you grow old, you happen to get married, buy a house, and have children. So, with all these milestones, you may want to add another ₹1 crore policy. 

Premium Flexibility

Buying two smaller policies from different insurers can sometimes be cheaper than buying one large policy. This also gives you the flexibility to drop one later if your financial situation changes.

Diversification of Risk

No insurer is immune to delays or disputes. Holding policies with multiple insurers ensures that a claim is not delayed or denied entirely if there is an issue with one provider.

Tax Benefits

Premiums paid for term insurance are eligible for deductions under Section 80C of the Income Tax Act (up to ₹1.5 lakh per year). Having multiple policies can help maximize this benefit.

Cons of Buying More Than Two Term Insurance Plans

Complex to manage

Tracking premiums, renewals, and policy details for multiple insurers can be confusing and time-consuming.

Higher overall premium cost

Two or more smaller policies may cost more than a single high-coverage plan, depending on age and health.

Loyalty or bundling benefits may be missed

Sticking to one insurer might get you premium discounts, better riders, or other perks.

Underwriting may get stricter

Insurers will assess total coverage across all policies. If it is too high for your income, they may reject or reduce coverage.

Disclosing Existing Policies Is Crucial

It is mandatory to reveal existing insurance coverage to the new service provider when buying a second or third term insurance policy. Apart from the legal angle, it also has an ethical one. Insurance contracts are based on the principle of 'utmost good faith'. Hiding existing coverage can lead to claim rejection.

For example, you have a ₹1 crore term plan with Insurer A. And you want to apply for another ₹1 crore plan from Insurer B. In such cases, you must inform Insurer B about your existing plan with Insurer A. Failure to disclose this can be viewed as fraud or misrepresentation of facts.

How Do Claims Work for Multiple Term Insurance Policies?

As long as the claim is genuine and there is no foul play, your insurance service provider, be it one or multiple, is liable to pay the sum assured. Here is how claim processing works:

  • Death of the Policyholder: The nominee should notify each insurance company about the claim.
  • Document Submission: Common documents required include the death certificate, original policy documents, identity or address proof of the nominee, and a properly filled claim form.
  • Investigation (if needed): If the death occurs within the first two years of the policy, it is likely to be called an "early claim". In such cases, your insurance providers may investigate your case elaborately for proper verification.
  • Claim Settlement: If all checks are cleared, the insurer will pay out the sum assured. Note: The nominee should submit claims to all insurers simultaneously to avoid delays.

Important Points to Keep in Mind

  • Policy Lapses: A lapsed policy due to non-payment of premium is not valid. Ensure premiums are paid on time for all your policies.
  • Waiting Periods and Exclusions: Some policies may have clauses related to suicide within the first year or exclusions related to risky occupations or habits like smoking. Read the fine print before buying.
  • KYC and Nominee Details: Keep your contact details and nominee information updated with each insurer to avoid complications at the time of claim.
  • Insurer’s Claim Settlement Ratio: While buying term plans from multiple companies, choose insurers with high claim settlement ratios and positive customer reviews. This reduces the chances of disputes later.

FAQs

1. How many term insurance policies can I buy?

Although there is no legal limit to it, coverage must be justifiable based on income and liabilities.

2. Will my nominee face legal troubles while claiming multiple policies?

If the policies are in order, premiums are paid on time, and disclosure has been honest, the nominee is unlikely to get into legal issues.

3. Should I go for multiple policies or increase coverage in one?

It depends on your premium affordability, the reputation of the insurers, and your life stage. Both strategies have their share of pros and cons.

4. Can I have different nominees for different policies?

Yes. You can assign different nominees, like your spouse, for one, parents for another. All you need to do is ensure the nominee details are clear and up-to-date in each policy.

5. What if I forget to pay premiums for one policy?

If a policy lapses due to non-payment, no claim can be made on it. Managing multiple policies is likely to increase the risk of missing a payment. So, you may consider setting reminders or auto-debit options.