There are many things you need to keep in mind when buying a life insurance policy, e.g., premium, cover period, claim settlement ratio, etc. However, your insurance need may change with change in your lifestyle and financial needs of your dependent family members. So, the insurance policy that you purchased at the age of 25 may not be sufficient at the age of 35 or the insurance you bought at the age of 35 may not be sufficient at the age of 50. So, you need to add more policies in the future as per changes in your insurance needs. Also, when buying a life policy, you can get the cover through a single policy or split it into two or more policies. What’s the best option? Let’s find out how your insurance needs changes and whether it’s better to have a single policy or split it into multiple covers.

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What’s Your Life Insurance Need?

Life insurance becomes more crucial when you have family members who are financially dependent on you. Depending on your financial planning and the financial needs of your dependent family members you can ascertain the sum that would be required by your family after your sudden death. Your insurance cover should be equal to or greater than the sum your family would need after your death. Financial needs of your family may change from time to time, so you should maintain an adequate level of life insurance cover.

Normally people buy a single life policy to cover the risk. However, having multiple policies has its benefits. In some cases, after the death of the insured, beneficiaries have found it difficult to get the claim from the insurance company. However, if the insured gets life covers from different companies and if any one of the companies has allowed the claim, then normally the other company can’t deny it as well.

Suppose, you had taken your first policy at the age of 25 years when you were not married and there were no specific financial responsibilities on you. However, after reaching the age of 40 years, you become married and have two children. Your old life policy may not be sufficient to provide you with adequate life cover, so you can buy another policy to enhance the cover size. In the future, you may add more policies to enhance the life cover as per the financial needs of your dependent family members.

How Splitting Policy Can Help You Optimise And Save Money?

As you grow older, your insurance needs usually reduce with a fall in your financial responsibilities towards your dependent family members. After children are settled in a job, they usually become financially independent. So, you don’t need a big-sized life cover anymore. For example, suppose your insurance need was Rs 1 crore till the age of 60 and thereafter you needed an insurance cover of Rs 50 lakh till the age of 80 years. If you take a single-life policy, you have to pay premium on Rs 1 crore policy till the age of 80 years. You can split your policy into two i.e. Rs 50 lakh policy for age till 60 years and the other policy of Rs 50 lakh covers till 80 years. This way it can help you optimise the insurance policies and save the premium at the same time.

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Finally

Splitting your policy can help you start with a small policy when you start your career and at a later age you can add more policies to enhance the cover size with an increase in your income and financial responsibilities.

The author is an independent financial journalist.