Is splitting term insurance beneficial?

Dec 06, 2018 | 2 weeks ago | Read Time: 3 minutes | By iKnowledge Team

Splitting your term insurance can help you with many things like providing financial backup or giving you an increased period of cover. However, it is important that you do it at the right time.

In modern times, where money is more than just a mode of exchange, it never satiates your need for it. Such behaviour cannot be titled as greed, moreover, this behavioural change can be attributed to the traits of financial insecurity and the fear of possible circumstances. These traits usually arise from the unpredictability of life, and responsibility on one’s shoulder.  

There are many ways to tackle such financial insecurities. One way is to get yourself insured. Insurance can be a great stress reliever for an individual. With the assurance of financial cover in their absence, a person can pursue his or her endeavors fearlessly. However, to make the best out of insurance, it is important that you choose the right policy. As majority of the populace prefers hassle-free things that offer great benefits at the end, one of the most appropriate decision would be to purchase a term insurance policy.

Term insurance was introduced in the past few decades, and due to the benefits it provides, it soon became popular among insurance buyers. Basically, term insurance is a simple form of insurance policy that offers coverage to the insured for a stipulated period of time. Term insurance is also known to have the lowest premium in comparison to other insurance products in the market. Even though term insurance is known to offer so many benefits, people often recommend splitting the coverage of term life insurance.

Why should you split term insurance?  

Splitting your term insurance can help you with many factors, such as, providing financial backup or giving you an increased period of cover.

  1. Extended cover: The maximum duration of cover that most insurance companies offer is up to 30 years. So, if you take a policy at the age of 25, the term insurance policy you take for 30 years will cover you only till you turn 55. Most financial experts, however, believe that you should have a cover till the age of 65 years. To avoid being unprotected for 10 years, or buying an insurance policy just for 10 years, you can consider splitting your insurance policy.
  2. Cover your financial commitments: You may have taken a home loan or other types of loans for different reasons. In the event of your death, the first thing they will go for are your assets and savings, while your family will be exposed to extreme financial pressure. In such a case, you can split your policy like this: when you take a home loan for Rs.30 lakh, you must also apply for a pure term plan of the same amount. While you are alive, you can keep paying the EMIs and premiums for the policy, and when you are no longer around, the insurance will keep your family covered and help them with the loans. You can stop paying premium or close this policy when the loan is over, if you prepay the loan.
  3. Different Nominees: The trend of nuclear families has engulfed the Indian populace as well. Newly wed couples now prefer living separate from their in laws for several reasons. Even though they live separately, they stay in constant touch with their families and fulfill their needs. For a term insurance owner, splitting the insurance policy can help him/her fund both families with the sum assured gained from them.

Splitting may seem beneficial, but there are some things that you need to consider while doing it. Purchasing more than 2 policies can be dangerous as it may increase the premium amount, and the policies should be bought from reputed institutions. When splitting term insurance, you must know that you will be liable to pay premiums for two different policies. Hence, it is important that you check the premium of both the policies before buying the insurance. You can take the help of a term insurance premium calculator to get the approximate figures.

II/Oct 2018/4538


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