When To Have Multiple Insurance Policies

When Insurance Is Taken From Multiple Companies

If you have bought an insurance policy from a particular insurer to secure your life, then the procedure and outcomes are known. But when you get it from more than one insurer or multiple insurers, then what are the advantages or disadvantages of doing so? 

Sometimes multiple health insurance policies become inevitable as the employer may offer policies up to a certain amount and the employee wishes to cover a larger sum insured or prefers an independent policy on their own. It is left to the choice of the insured person to choose from the companies functioning in the market, but many times they prefer the employer’s policy first. 

People get second insurance fearing the rejection of a claim by the first insurer. It is possible to get multiple term insurance provided the total sum assured from all policies is not higher than the Human Life Value of the insured. Here is an article focusing on the consequences of getting insurance coverage from multiple insurers.

Advantages:

• In the case of the sudden death of the policyholder, the dependents shall get death benefits from multiple insurers. This works as substantial financial support for the family.
• The policyholder can choose the insurers whose claim settlement ratio is higher to avoid chances of rejection. If by chance there has been any prior experience of getting a poor claim settlement by a particular insurer, the insured can get additional coverage from other insurers. 
• When you go for multiple insurance policies from different companies, the risk of claim rejection is kept to a minimum. If one company rejects the claim, another insurer will be there as an alternative. 
• You can buy insurance plans based on the life goals which are again dependent upon the needs of each of your family members like children’s education, children’s marriage, etc. Instead of buying a single 20 or 30-year policy, you can go for multiple plans with different maturities. This will help you manage your funds with changing needs at different stages of your life. You may like to get term covers based on maturity set in a way so that you get money after you stop working and a few others extending to the maximum possible tenure. 
• If you have taken multiple Defined benefit policies such as Life Insurance policies, Critical illness policies, accidental death, or disability policies, all of them will pay irrespective of how many such policies an individual has. Usually, high expense diseases or critical illnesses are not covered in the general health care plan. Thus the coverage can be maximized while keeping the risk at a minimum. 
• There will be flexibility in the number of claims, and by using this feature you can save money while using multiple benefits.
• In the case of health insurance, you can secure yourself against several diseases and your family can also benefit in case of any unforeseen hospitalizations. In the situations where the expenses incurred for the treatment are more than the sum assured, the second or multiple insurances can be used to cover those expenses if the limit of the sum assured is exhausted. 
• You can break down a large cover into smaller covers. That way you can get a bigger coverage without paying a huge premium for a single cover. 

Disadvantages:

• Multiple policies such as health insurance policies do not make sense. The total amount cannot exceed the sum insured on all policies put together.  
• You end up dealing with multiple insurance companies when the claim settlement process starts. 
• It is better to get insurance of a higher amount from the same insurer as the premium rate per additional lakh of coverage drops as the coverage increases and eventually it becomes negligible after a certain amount of coverage.

At the time of lodging a claim, if the policyholder’s health insurance claim is less than the sum assured, he/she can claim only under a single policy. But where the claim is more than the sum assured of a single policy, then the policyholder can choose either of the two: A cashless claim or the reimbursement of the claim.

Under the cashless claim option, the policyholder has to raise the claim from the first health insurance company and also get the settlement summary. He needs to attest to hospitalisation bills and approach the second health insurance company to request payment of the balance amount. Cashless claims are possible in the case of network hospitals. 

If the policyholder is treated in a hospital that is not covered by the health insurance provider’s network hospital, then the question of reimbursement arises. He needs to pay the hospital bills first and then claim for reimbursement. After that, he needs to fill out a claim form along with attested documents, prescriptions, and other reports and submit it to the health insurance company. He has to submit a claim settlement summary when multiple insurers are part of making the claim.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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