Do you need a second life insurance policy? Read on to find out more

Dharmesh Joshi, a 32-year-old married man with two children, has parents who stay with him. He has a term insurance policy of Rs 50 lakh sum which he bought when he was 25 years old. It was taken with the intention of saving taxes rather than seeking financial protection for dependents. So when he recently met with his financial adviser who asked him about supplemental life insurance, Dharmesh was surprised. “I already have a life insurance policy. How much more should I invest in insurance. I plan to look at other investment options! He asked.

This is a common approach that most of us have towards life insurance. However, our insurance must increase as our revenues and liabilities increase. Most of us do not understand these changing needs and the importance of politics in our lives. Which also comes with the general approach to insurance policies: buy and forget.

Insurance is seen as a simple tax planning tool

Insurance, for most of us, is only a tool for tax planning rather than an instrument of disciplined savings and a means of financial protection. Many of us may believe that our existing insurance policy will be sufficient to deal with the uncertainties. The questions to ask are: Does my policy protect me against all eventualities in life such as unfortunate death, illness, hospitalization or disability? Should I regularly review my insurance needs?

Buying more than one life insurance policy when your lifestyle changes is the best way to ensure your financial security.

A life insurance policy is the only tool that provides financial protection for you and your family in the event of death and survival, as well as disability and illness. Some plans offer benefits such as the ability to access the cash value of the policy through withdrawals or pre-planned income payments to fund a child’s education, marriage, retirement income, or the realization of any other dream of life. It offers tax-free loans for other lifetime savings needs as well as lump sum benefits on medical conditions.

The advantages of a second life insurance

There are several advantages to purchasing a second life insurance policy. First, different maturity dates for different policies allow an individual to assess changing financial needs and liabilities at different life stages. It also helps to opt for stage-based protection planning where a person can purchase life insurance based on the number of dependents and goals such as marriage, raising children, buying a property, etc.

It is important to note that with changing times, insurance plans are evolving and offering new and innovative solutions that can lead to the achievement of desired results by an individual.


It is imperative to consider the three rules of thumb – level of coverage, type of coverage and duration of one’s life insurance coverage – before purchasing the additional plan.

Level of coverage: It is important to describe the family’s cash flow needs and financial goals. Add it all up to determine the estimated amount of money the survivors would need. Then look at the money that would be available – the family’s total annual income, long or short term savings as well as existing life insurance policies (perhaps through the employer) . The difference between a family’s financial needs and available resources will help to assess the adequate sum insured, just enough for comprehensive protection.

Salaried persons generally benefit from the life insurance benefits offered by their employers. These policies are group plans and extremely advantageous within their structure. However, these policies usually fail to meet the full financial needs of an individual, as the sum assured may be less than required. It is therefore advisable to have a life cover that offers benefits up to 10 to 15 times the annual income.

Type of coverage: There are different types of life insurance plans designed to meet different financial goals. While term plans meet the requirements of the initial family stages and provide income protection; children’s plans help secure the child’s future by providing adequate funding at the time of education and marriage.

You can also opt for endorsements to enhance existing life insurance plans. Riders include additional benefits that can be added to an existing policy at nominal costs without changing the basic life insurance plan.

Duration of coverage: IIt is crucial to consider the current income level and the expected remaining years until retirement. Then calculate the duration of the insurance coverage to assess the actual amount needed to replace expected future earnings.

(Anil Kumar Singh is Chief Actuary, Aditya Birla Sun Life Insurance Company Limited)

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