Death Claim: Can You Use Multiple Policies?

By Kavya Balaji | April 13, 2018

Did you know that your family can make claims on all Life Insurance policies in your name? However, there are certain conditions. Here’s all that you need to know.

There was always a rumour doing the rounds that you cannot buy multiple Life Insurance policies. Now with more awareness, people know that they can hold as many insurance policies as they want. However, there are still people who believe that they cannot make claims on all their Life Insurance policy. Can you really make claims on multiple policies? Yes!

You will be within the law even if you make multiple death claims across policies. What does this mean? This means that the beneficiaries under a Life Insurance policy can make claims using all the insurance policies in the policyholder’s name in the unfortunate event of the policyholder’s death. But there are certain terms and conditions to this. Want to know about them? Read on.

The terms and conditions

Make the disclosures – While applying for an insurance policy you should disclose the facts about your other insurance policies. This is only for your Life Insurance policies. You cannot make claims using multiple Health Insurance policies unless your sum assured got exhausted.

So, while applying for a new Life Insurance policy, tell your insurer about the other Life Insurance policies that you have. You might have to reveal when you bought the plan, how much coverage it gives you and how long the plan is for. If you don’t do this, insurers will consider it to be a misrepresentation of facts and your claims may get rejected. Disclosing these facts will also help you get the right coverage based on your income, family situation and your liabilities.

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Combined sum assured of all policies should not exceed Human Life Value – A Life Insurance policy is issued only after the risks are assessed. In case of a Health Insurance plan, risks to your health will be considered while for Life Insurance policy, the risks will be assessed based on your income, existing coverage and liabilities. This is called underwriting. In this process, your Human Life Value will be determined by the insurer.

Human Life Value is a method used to calculate the Life Insurance needs of an individual. This method will take into account the amount of financial loss a family might suffer in the event of the demise of the policyholder. Human Life Value is calculated based on various factors such as an insured person’s age, lifestyle, gender, retirement age, number of dependents, occupation and annual income. This method will also take into account the finances of the policyholder’s spouse and dependent children.

The main purpose of the Human Life Value method is to find out how much money will be required by the family to replace the loss of income in case of the demise of the policyholder. So, insurance companies expect the policyholder to get only up to the amount of the Human Life Value. That is why the sum assured for all your insurance policies put together should not exceed the Human Life Value that is calculated.

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Now, if this is the case, what are the advantages of having multiple policies? The first point is that your family can be protected from claim rejections. Making full disclosures alone doesn’t ensure that your claim doesn’t get rejected. There are many other reasons why claims could get rejected. Simple things like missing a premium payment or not assigning a beneficiary to the policy can lead to the rejection of claims. This is where having multiple policies can help.

The second point is that you can get better coverage from multiple policies in certain cases. For example, some Life Insurance policies have a low maximum maturity age even though the premium might be low. In this case, having another policy in hand makes sense. Also, your Life Insurance requirement changes on events such as marriage, birth of a child or job loss. This is when you might need additional cover. Having multiple Life Insurance policies after these events will also help. When there are additional liabilities such as a Home Loan, you might need to get additional insurance cover especially if you are the only one repaying the loan.

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However, multiple policies mean paying multiple premiums. You have to remember those premium payment dates, pay the policy premium on time and ensure that you renew the policy if you want to benefit from having multiple policies. Policies could lapse if they are not renewed on time. Also, you have to ensure that your beneficiaries know about all the policies that you hold.

Smart management of Life Insurance policies will help you get the best out of them. Compare across insurers to get the best plan at the lowest possible premium.

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