A term insurance policy ensures protection by offering financial coverage to the policyholder. It is one of the preferred protection instrument because the policyholder can feel secure knowing that their family will be well looked after, even if they are no longer around due to unexpected reasons.
What is Term Insurance?
A term life insurance is a protection you can get, not only for yourself but also to ensure that your family is taken care of. Even as you begin working at your first job, it is imperative that you design your life goals in such a manner that you are able to set aside certain funds to meet your life goals of caring for your family. A term plan may also serve as an investment because you also have the option of receiving all the premiums paid towards the policy once its term expires depending on the variant chosen by you. You can buy term insurance and customize it to include a cover for unforeseen eventualities such as disability and critical illnesses, according to your requirements, thereby ensuring that your financial losses are minimal in case you contract any critical illnesses or suffer from disability.
A term life insurance plan offers you adequate coverage at affordable premiums, and you can avail protection from critical illnesses covered within the plan as well. You can ensure increased protection by opting for multiple add-on covers such as Accidental Death Benefit, Accidental Total Permanent Disability Benefit, and even Waiver of Premium Benefit, which can prove especially useful at times of financial difficulties.
Even though one term life insurance policy offers a plethora of benefits, it is advisable to opt for two or more because your term insurance claim can be rejected in some cases. If you have more than one term policy, the nominee would not lose the total sum assured even if one claim is rejected. There is a chance that another insurer will accept it. While getting more than one term insurance will help reduce the risk of claim rejection, it is also important to be aware of the common causes of rejection.
Common Reasons Why Term Insurance Claims Get Rejected
When you buy term insurance, it is necessary for you to double check the fine print and understand the different components of your plan. On many occasions, insurers have refused to honour term insurance claims raised by beneficiaries upon the policyholder’s demise. In FY 2018-19 alone, insurers rejected 3.06% death claims which translates to more than 10,000 insurance claims being rejected and a total monetary value of Rs. 564.18 crores.
There are many reasons why this can happen, and most of them can be avoided if the policyholder pays careful attention to the fine print that is part of their term insurance policy. Read on to learn of some of the common reasons why insurers reject claims.
• Lapse of Policy
The date for paying insurance premiums is fixed at the time you buy term insurance, and it is imperative that you stick to it. It is best to set up an auto-pay mechanism with your bank account wherein your premium amount is automatically transferred to the insurer before the due date. This also helps in cases when you are unwell or too caught up with other things to be able to make the payment. If the term insurance policy lapses while the policyholder is unwell and the policyholder dies after the grace period, their beneficiaries will be unable to receive the death benefit.
• Medical History and Lifestyle Habits Unknown to Insurer
An insurer may reject claims if they did not know some parts of the policyholder’s medical history at the time the term insurance was in effect. This can especially relate to situations where the policyholder has a history of diseases such as cardiac disorders, which may result in death, and they did not inform the insurer. This is why it is important to be completely transparent regarding your medical history with your insurer, since your beneficiary’s claims can be rejected otherwise post your demise.
Additionally, it is necessary to inform your insurer about lifestyle habits such as smoking if you are a regular smoker since that can drastically increase your risk factor to an insurer.
• Incorrect or Incomplete Information Provided to Insurer
While filling out details for claiming the amount due to you, it is important to pay attention to detail and ensure that you make no mistakes in sharing details of the policyholder and the associated policy in the claim intimation form.
• Non-Disclosure of Prior Insurance Policies
If you have two or more insurance policies, it is important for your insurer to know this. You need to disclose all such information to your insurer in order for your beneficiary’s claims to not be rejected later.
Can I Take 2 Term Insurance Policies And What Are The Benefits?
While term insurance is comparatively cheaper than other life insurance products, its benefits may not prove adequate to your requirements. Thus, in order to avoid a situation where your need for coverage increases, it is best to have bought two or more term insurance plans well in advance.
If you have ever wondered, "Can I take 2 term insurance policies?" the answer is – Yes, you can! Read on to learn about why you should.
• Increase in Responsibilities as you Age
When you buy term insurance, you can decide on its maturity period after which it no longer covers you. As you grow older and your responsibilities increase in line with your life stages, you will require more coverage thereby prompting the need for additional term policies. Thus, you should consider opting for two or more term insurance plans as your needs grow and your requirement for coverage increases.
• To Ensure Continued Human Life Value (HLV)
The HLV is a figure that denotes the amount an individual is likely to earn as income over the remaining course of their life, after they have bought a term insurance policy. With multiple term insurance policies, a policyholder essentially ensures that their beneficiaries can access the benefits of their HLV even if they are no longer around.
• Increased Number of Riders
Riders are add-ons you can get with your term insurance plan by paying nominal extra cost. By investing across multiple term insurance plans, you can ensure that you get benefits from across different riders. Not all insurers offer the same riders, so by investing across different plans you can easily gain the benefit of multiple riders.
Steps to Buy or Claim Multiple Term Insurance Policies
The steps for buying or claiming one or multiple term insurance policies remain the same, as it would be if you were buying or raising claims on just one term insurance policy. However, as mentioned earlier, it is imperative for you to disclose to your insurer details of all the term insurance policies you have invested in when you buy term insurance.
It is always better to have multiple term insurance plans so that your beneficiary is well equipped to meet their different life goals at different stages of their lives. However, in the interest of complete transparency and to ensure that your beneficiary’s claims are not later rejected, you need to inform the insurer about the different term policies that you have applied for.