June 9, 2021

Why Splitting Term Insurance Can Optimize Cover & Cost?

  • by Jarrell Marley
  • 3 Years ago
  • Comments Off

Numerous individuals are now opting for term insurance to secure their loved ones from any financial hiccups. However, can one policy safeguard all your needs? Maybe not! Sometimes you require protection in different stages of your life due to increased responsibilities. So, find out more about splitting your term insurance and how it can be beneficial for the long term below.

What Does Splitting Term Life Insurance Mean?

When you consider the financial requirement of your family to live independently in your absence, the figure is much higher. This is because, you need to account for any pending debts, home loans, monthly expenditure, educational expense, medical cost, etc. On calculating all such expenses, you may come up with an insurance requirement of INR 1.5 crore.

Due to the availability of numerous insurance providers in the market, you can easily get an affordable term life insurance plan with a sum assured of INR 1.5 crore. However, instead of opting for just one plan for a policy term of 25-30 years, you can split your term insurance and get two plans. One can safeguard you until your retirement age and the second will secure your loved ones post retirement when you do not have a steady income. This is called as splitting your term insurance to gain more coverage.

How Does Splitting Term Insurance Work?

Therefore, instead of purchasing just one insurance policy to cover all your needs, you can split it into two. If we consider the total insurance requirement to be INR 1.5 crore, the first life insurance term plan can be of INR 1 crore till the age of 60 years. Until your retirement, you shall have home loans to pay off and your children who aren’t financially independent. Hence, if something unfortunate happens to you, the insurance coverage will be enough as a financial backup.

Your second insurance plan can have a sum assured of INR 50 Lakh for the post-retirement period. As all your debts and other family responsibilities shall be complete by now, the second plan can safeguard the interests of your spouse. Splitting your term insurance not only enables you to gain more coverage but also helps save up on term insurance premium. You can easily compare the costs of two term plans of INR 1 crore and INR 50 Lakh with the premium for a policy of INR 1.5 crore. The former shall assist you with saving up on the premium.

Benefits of Splitting Term Insurance

Here are some key perks that you can avail for the long term by splitting your insurance plan:

  • Provides extensive coverage

Most term plans have a maximum policy tenure of 25-30 years, which is not sufficient in many cases. If you had purchased insurance in your early 20s, you will not have any backup by the time you get closer to the age of retirement. However, by splitting the term plan, you can avail extensive coverage for a longer tenure by planning it well. Just like mentioned above, one policy can secure your interests before retirement and the second can be dedicated for post-retirement.

  • Grants term insurance tax benefits

You can enjoy tax saving with term insurance and claim the premiums and the death benefit as a deduction. Therefore, along with a life cover, you can avail term insurance tax benefits.

  • Covers various financial liabilities

Splitting your insurance enables you to cover several financial liabilities without any trouble. Due to extended coverage, you can simply plan your life goals according to the policy term and gain protection.

With this, you can now manage your insurance plans and make the most of your investment without spending all your life savings!

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