EVER since we started looking upon computers as our lifeline, we've come to realise the importance of back-ups. We dread the thought of waking up one morning and finding our work deleted because of a hard disk crash so we backup and backup once again.

So it's no wonder we now believe in backups for almost everything. Backup credit cards in case the first doesn't swipe, back up cars if your preferred car has a break down and now even a back up health insurance policy in case there is ever a problem with the first.

May sound absurd but Mehboob actually realised the worth of his backup policy when he met with an accident and was informed that the hospital didn't have a tie up with the third party authority (the liason between you and your insurance company) due to which he would have to pay his bill (a phenomenal Rs 1 lakh) upfront and claim reimbursement later. As luck would have it, he had not one but two backups so when his first policy could not be used, Mehboob easily invoked his second policy which was cashless.

But does it always make sense to have more than one policy at hand? We find that there can be certain pitfalls in that.

a. Firstly, is it even legal? Vice President, Accident and health covers, Tata AIG, Ramesh Ramani affirms, "There's nothing illegal about purchasing multiple health covers, but in case a claim arises, the same would be split among insurers, depending on the cover taken by the policyholder. In short, he will not be able to make a full claim from one insurer. If the individual has declared that he has bought three different policies from three insurers there's nothing wrong. " The key here, is disclosure!

b. Is it essential? Officials at Bajaj Allianz General Insurance say, "There's no disincentive if a person gets himself treated at a hospital that's not on our list. He would only lose the cashless facility. He can pay up the hospital bills and claim a reimbursement from us. So why take a separate policy."

c. Is it reliable? Chartered Accountant Bhargav Vaidya says, "Buying from more than one insurer is most unreliable, since there could be problems later. First as an individual, you will be shelling out more money. Second, if you forget to disclose anything and the same comes to light later, you would be held guilty of suppressing important facts."

d. What about eligibility for the no-claim bonus? If a person does not make a claim, he will get a 5% cumulative bonus on his policy for each claim-free year. This no claim bonus adds up for each year. But According to C S Rao, Chairman of Insurance Regulatory and Development Authority (IRDA), the impact of 'no claim bonus' for multiple policies will be governed by the way the policy is worded. When the insurance policies carry a clause called contribution clause, once a claim is made, all the policies will contribute to that claim and so the 'no claim bonus' may not continue. Hence the policyholder will not be entitled to any no claim bonus on any of his multiple covers once he makes a claim on any policy

e. Isn't it suspicious? Sometimes with multiple policies suspicions are aroused. Experts from Bajaj Allianz General Insurance say, "Insurance is a matter of utmost good faith and not wagering. So if such a case were to come to us, we would first check why he has approached more insurers for insuring the same illnesses. Or whether he has been declined cover for any illness."

f. Why take a risk? In case of suppression of the fact that multiple policies are held, the premium will be loaded the next time he makes a claim. Oriental Insurance officials explain, "Premium depends on the age bracket in which the individual falls, as also the claim experience."

g. What about the inconvenience? Rao concludes, "Multiple health covers can prove inconvenient in actual operation because of the need to deal with several insurers in respect of the same event. It may be better to choose a single insurance cover that suits the insured's needs best."

So back-ups on medical insurance might not be such a great idea. But hang on to that car and computer back up. You never really know when either one crashes.

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