Why Buying Term Insurance from Multiple Insurers won't reduce the Risk of Claim Rejection
Many of the financial experts suggest that not put all eggs in just 1 basket that simply means you should not invest your hard-earned money in just one financial instrument. Rather than, you should diversify your investments.
But should you apply the same strategy for your term insurance plan and also purchasing multiple term insurance covers from different life insurance companies?
Many people I know who buy term insurance plans from 2 or more life insurance companies simultaneously. For instance, today if they want to cover themselves for AED 1000000, they purchase 2 different term insurance plans of AED 500000 each from two different life insurance companies at the same time. When I decided to know the sole reason behind the same, I got to know that they buy different term insurance covers from different insurers in order to avoid the risk of claim rejection. In that case, if they buy term plan from one Life Insurance Company and it gets rejected, they assume that the other term plan would pay.
So, now the question arises, does buying different term plans from multiple insurers reduce the risk of claim rejection? Or is there any surety that if one insurer rejects your claim then other one would accept it?
To know the answers to these questions, read this article till the end.
Know about Claim Rejection
Well, there is no harm in considering the claim rejection risk as important criteria while buying term life insurance. But understanding the key reasons behind claim rejections is a smart decision you can make so that you can at least alleviate the risk of claim rejection.
The first and foremost reason for claim rejection of death claims in term insurance plan is non-disclosure or/and wrong disclosures of material facts. All these disclosures could relate to occupation, income, medical history (of self and blood relatives as well). In addition to all these disclosures, some of the life insurance companies also demand to provide the details of previous life insurance proposals that might have postponed/rejected or revised & accepted with some specific terms, coverage details of the existing term life insurance plan, etc.
So, if you disclose any of the above-mentioned details wrong then there are high chances of claim rejection. However, if you have made all these disclosures transparently and correctly, then your insurer would definitely not reject your claim.
If you are purchasing term life insurance plans from two different life insurance companies and disclosing exactly the same facts to both of them then they will have to pay the claim if it meets all the terms & conditions under the term insurance plan. There is no chance in any manner that with exactly identical disclosures with 2 life insurers, one insurance company would accept your claim and the other one would reject it depending on the non-disclosure or wrong of material facts.
Why Insuring Yourself With Only One Insurance Company is Beneficial?
Insuring yourself with only one life insurance company is not risky at all until and unless you have disclosed all the material details correctly in the proposal form. In fact, you might be happy to know that there are some amazing benefits of not diversifying your term insurance policies and buying term plan from a single company and they are as follows:
Cheaper Insurance Premium
Majority of the leading life insurance companies in the UAE offer exciting discounts for a larger sum assured. Therefore, the premium for a larger sum assured is way more cheaper as compared to the sum of its parts. The larger sum assured of your term insurance policy, the cheaper premium you will have to pay. For instance, purchasing two term insurance plans of AED 500000 each could cost you more than purchasing a single policy of AED 1000000. So, it is suggested not to split your term insurance policies in order to save money on premiums.
Easy Claim Process
The beneficiary will not have to run around here and there for completing claim formalities - submitting required documents and various proofs to multiple life insurance companies. This will certainly reduce the hassle and make it easy for the nominee to proceed with the claim process further effortlessly.
Zero Risk of Mismatch & Errors in Details
Well, there are high chances that you could overlook mentioning some details to one insurance company while making simultaneous applications that may cause the claim rejection. So, if you buy term insurance from only one insurance company then there is a zero risk of errors or details mismatch.
The Final Verdict
Though diversification in investment is considered as a smart idea as it helps in alleviating the risks and creates better returns. However, the scenario is different in case of term insurance plan. There is no need to buy term plan from multiple insurers in order to reduce the risk of claim rejection. All you need to make the right disclosure of the material list to alleviate the claim rejection risk. So, we would suggest you buy term insurance plan of a larger sum assured from a single insurance company instead of splitting into multiple ones so as to save on premiums and make the claim process easier for your nominee(s).