Term Insurance Plans

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Should i Split My Term Insurance?

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Term insurance is a pure and simple kind of life insurance that offers you protection against the Risk of life. It lets you have the peace of mind so that even if you are not around to take care of your family, your family members will not be left in the lurch to fend for themselves. Financially they will be secure as the Term insurance amount will be paid out to them after the death of the insured. Term Insurance is also one of the cheapest policies available in the insurance market as there is no investment involved besides the insurance.

However, you may have many questions and queries about what type of insurance you must go for, when and how to go about it, what should be the amount and so on. Most of the insurance companies will provide you term insurance for a maximum of 30 years and till you are 60 years of age. So if you are young, you may go in and buy a term insurance for a maximum duration of 30 years. If you do so, in all probability, your insurance cover will expire before you reach the age of 60. What do you do after that?

You still have some more years to live and your spouse too is there for you to support. Should you go in for a new insurance Policy or should you renew your old insurance? However, there will be various roadblocks now as you are not younger any more. You are nearly 60 years of age, with certain age-related illnesses to accompany you. Chances of death increases with increasing age, and the company may even refuse insurance cover. Getting a new insurance policy is nearly impossible now, and will come with a very high Premium if at all you get the policy. Same is the case if you think of renewing your old policy.

Therefore it is only natural that you are undecided about your term insurance plans. Should you go in for a plan of large amount or a plan of smaller amount? Or should you split up your large insurance amount into multiple policies of smaller amounts? As insurance experts says that it is always better to split up your life insurance cover into two or more term plans of smaller amount as it imparts flexibility to your insurance cover.

The following are some of the advantages of splitting up your term insurance policy:

  • Splitting up your term policy into smaller ones of varying durations will ensure that you have the required money with you during key milestones in your life. You may then require money in lump sum or an emergency can come unannounced.
  • If in future your insurance requirement declines because of your improved financial situation, you can make a safe exit from one of the term policies and save large premium amount.
  • You can then use this amount saved in a good investment option that offers a good interest rate. For example, the interest rates offered on fixed deposits are generally very good, especially when it comes to large tenures such as 3 to 5 years.
  • Premium for term plan goes up as the tenure increases. In this scenario, single term plan providing huge cover over a period makes you over-insured as the need for insurance declines as you grow older. Therefore splitting the policy into different tenures depending on age and requirement helps to reduce the cover by ending one of the policies.

Term plans are basic, risk-only covers and are the cheapest form of life insurance. They are used to take care of an individual's insurance needs at a low price and do not come attached with investment. Therefore, it makes good sense and will benefit you a great deal if you split up your term plan into smaller plans.