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There are many reasons why people choose to do this, including to ensure that they have ample financial security. However, it is also crucial to know what you are getting yourself into before doing this. Here is what you need to know.
Protecting your loved one’s financial future
You can approach multiple life insurers to take out life cover. Some of the reasons why people do this is to provide financial security for themselves and their loved ones in the future. “Insurers will take you through an underwriting process to assess your health, lifestyle, and occupation to see how much cover you will need. This will differ from insurer to insurer, meaning that one insurer might not cover you for a health issue or occupation risk while another may do so,” points out CEO of MiWayLife, Craig Baker.
Different pay out amounts
Another reason why people consider taking out multiple life insurance policies is because of the different payout amounts that insurers offer. One insurer may cap their payouts at R500,000 while another can cap it at R10 million. The cover amount you will receive is affected by the underwriting process which you can find out more about here. Keep in mind that you will be assessed on an individual assessment, which could make the payout amount different for you compared to the next person.
Being able to cover debt
Debt is a major issue that many people face but dying doesn’t mean that your debt will be scratched off the books. The last thing that anyone wants is to have their loved ones shoulder their debt, which is why having another policy in place that can help pay off the multiple debts you may have accumulated and still be able to leave something for your loved ones.
The disadvantages of taking out multiple life insurance policies
While it may be possible to claim from multiple life insurance policies, there are a few disadvantages that you need to factor in. Having multiple life insurance policies can lead to you being over insured. What this means is that you could end up paying more than what you get out of the combined policies you have.
You will also have to juggle paying multiple premiums that increase each year and could end up being costly. Keep in mind that life insurers use the underwriting process to assess how much you earn to avoid giving you a policy you will not be able to afford. It is also used to determine the correct cover amount that will replace your financial contribution to your loved ones, which means that you will not be paid out more than what you put in.
Remember to carefully read the claim conditions
Always remember to carefully read the terms and conditions that come with your policy to understand it. It can help you understand what you are covered for and what you will not be able to place a claim on to avoid disappointments.