A term life insurance policy is essential to provide you and your family members financial security in case of your untimely demise. By investing in a term plan online you secure the financial future of your family who depends on your income for their financial needs. As such, buying a term insurance plan is a must when you plan your financial portfolio.
While a term plan online can be bought easily, you have two options of investing in term insurance – buy one plan or split your cover under two or more term plans. While the former is a simple concept, many individuals do not understand the concept of splitting the cover in term insurance. So, let’s explore –
What is splitting cover in term insurance?
Splitting cover in a term insurance plan is nothing but buying multiple term insurance plans on your life rather than one plan. So, if you buy more than one term plan, it is called splitting term insurance cover.
Why splitting cover makes sense?
If you are wondering why to invest in multiple term plans on a single life, there are reasons why splitting cover proves to be a wise alternative rather than a single policy. Let’s understand these reasons in details –
1: To increase the coverage affordably
When you buy a term insurance plan, you should ensure that you opt for a suitable cover under the plan. The sum assured of the policy should be sufficient to take care of all your financial responsibilities in your absence. Affording a high sum assured early in life when your income is limited might prove to be a challenge. In this case, you can initially invest in an affordable term plan online where the sum assured is low. Later on, when your income increases, you can buy another policy to increase the coverage and make it optimal to cover your financial responsibilities.
2: Responsibilities increase with age
When you are young and unmarried, you have minimal responsibilities. When you buy a term plan at this stage of life, you might opt for a limited sum assured. However, when you get married and have children, your responsibilities increase. At that stage of life you need a higher coverage as the existing coverage might prove insufficient to meet your increased responsibilities. So, in such cases, you should step up your term insurance coverage at different life stages to meet the increased responsibilities that you have. Splitting the cover and buying another term plan at later stages of life, therefore, makes sense.
3: For longer coverage duration
Term insurance plans pay the death benefit only in case of death within the coverage duration. If the duration expires, the coverage stops. To avail of longer coverage duration, splitting term insurance plans can prove useful. In such cases, when you are young, you can opt for the maximum policy tenure and get coverage up to a specific age. Thereafter, after a few years, you can buy another plan and choose the maximum duration in that plan to extend coverage beyond what your existing plan is offering. For example, say you buy the best term insurance plans online when you are 25 years old. The maximum coverage duration of the policy is 30 years or 70 years of age, whichever is earlier. In that case, the coverage would expire when you reach 55 years of age. To enjoy coverage for a longer period, you can buy the plan again at 40 years of age. Again the plan would offer coverage till 30 years or 70 years of age, whichever is earlier. In this way, when you buy another plan at 40, you would be able to avail coverage up to 70 years of age, which are not available under the existing policy.
4: For higher tax benefits
As you split your term insurance coverage across multiple plans, you pay multiple premiums and you can claim a tax benefit on all the premiums paid. Thus, this allows you to claim a higher tax benefit on premiums paid for the term plan under Section 80C of the Income Tax Act, 1961.
Understand the concept of splitting term insurance cover and then invest in the best term insurance plans online for higher coverage at lower premium rates. To find the best term insurance plans online you can visit www.etmoney.com which is the best personal finance website. On the website, you can find the leading term plans offered by the leading life insurance providers. Moreover, ETMONEY’s best personal finance website would allow you to compare and invest in the best policy which offers the most comprehensive coverage at the best premium rates. You can also buy the plan online with minimal hassles and get covered at the earliest. So, if you already have a term plan, assess its sufficiency. If required, invest in another plan to split your coverage for maximum benefits through the personal finance website of ETMONEY.