Are you thinking of taking a term insurance policy? Are you taking a policy of less than 50 lakhs of sum assured? Are you planning to take more than one term insurance policy? If an answer to all or any of the questions is affirmative then please wait, read this article and then think again.
Is a term insurance of less than 50 lakhs beneficial?
Ideally, a term insurance of any amount is beneficial. But if we compare the benefits from a term insurance of less than 50 lakhs and more than 50 lakhs of sum assured then without any doubts, latter has an advantage over former.
Advantages of a term insurance of more than 50 lakhs
There are two main benefits of buying a term insurance of more than 50 lakhs of sum assured. These benefits are:
Lesser premium for more than 50 lakhs sum assured
A premium on 40 lakhs sum assured is more than a term insurance of 30 lakhs. Justified enough as there is an increase in the amount of sum assured, therefore there will definitely be an increase in premiums. But if you choose to take a term insurance policy of say 60 lakhs, the premium amount required to be paid will be less than what you have to pay for 40 lakhs sum assured. Isn’t something strange about the premiums? Now, the question arises why a premium on 60 lakhs sum assured is less than premium for 40 lakhs sum assured.
Mostly the companies require medical tests for policies exceeding Rs. 49.99 lakhs. A person who has undergone medical tests is somewhat less risky as compared to the one who has not passed through these tests. Since companies require tests for all those persons opting for a policy of more than 49.99 lakhs, it covers a part of the risk. Due to less riskiness, companies offer discount on term insurance policies of more than 50 lakhs sum assured.
However, it should not be assumed that the policies than 50 lakhs sum assured are not worth. If you have provided the correct information to your insurance company, then there is nothing for which you have to worry.
Anyways, when you can get the benefit of a high amount of sum assured by paying less amount of premium, then I guess it is more rational to opt for a policy with high sum assured.
Benefit of going through medical tests
There are many people who take a term insurance policy for less than 50 lakhs because of a simple reason – they don’t want to get in to the hassles of medical tests. But if you ask me, I don’t see any harm in getting the tests done. Let us say, you have applied for a policy of 35 lakhs sum assured and you have mentioned that you are not suffering from any ailment. This information was best to your knowledge. However, the fact was you have a disease which you are not aware of. Suppose that after 4 years you expire and insurance company rejects to settle your claim on the plea that you suffered from a disease. Unfortunately, you have no way to come back in this world and argue that you were not aware of any such disease. Therefore, it is always better to follow a path with crystal clear things.
Can I split my term insurance in two policies?
If you are thinking of taking two insurance policies for 40 lakhs each instead of one policy for 80 lakhs sum assured, then you will end up paying more premiums. However, if you select a single policy then the total premium will be less.
To sum up, a term insurance policy of 50 lakhs or more is a better proposition than taking a policy for a lesser amount.