You are legally allowed to hold multiple life policies, although life insurance companies may be more concerned with your total benefits. Having multiple life insurance policies can give you access to more coverage and greater peace of mind. In this article, we cover what you need to know about buying multiple life insurance policies.
If you plan to use multiple life insurance policies, you should probably speak with a financial advisor who specializes in helping you do it the right way.
Types of life insurance
Life insurance is not just one type of insurance policy. There are two main categories of life insurance: term life insurance and whole life insurance. Each behaves differently and which one is right for you will depend on your goals. Let’s take a look at what each does and if you should buy the same types of life insurance or if it’s better to mix and match.
Term life is insurance that expires after a certain number of years, such as 20 or 30 years. If you die before the policy expires, the policy pays out the specified amount. However, it will not pay anything if you are still alive after the policy expires. You can renew the policy, but the rate can be much higher if you wait until it expires to renew. These policies are popular because premiums are lower than those of whole life insurance.
All the life
Whole life insurance does not have an expiry date like term life insurance does. It also creates cash value that can be used for many purposes, such as tax-efficient retirement savings. The lack of expiration on whole life insurance can be attractive, but they tend to have higher premiums than term life insurance policies.
Reasons for having multiple insurance policies
For many people, one life insurance policy is enough. But there are some reasons why you might want more than one policy. Consider the following scenarios:
Modification of financial objectives: Our lives are not static, and that means our financial goals often aren’t either. Maybe you have a baby or are moving into a bigger house. These things can be exciting, but they can also increase your financial obligations. Consequently, you may find that your current life insurance policy is insufficient.
Supplementing an existing policy: There are many types of life insurance, as we have seen. But you can also have a policy per job, for example, that you want to complete. This could be good both for increasing your coverage and because you probably won’t be able to keep your group policy if you quit your job.
Added long-term care coverage: Long-term care is a major expense. Adding an additional policy can be helpful if you want to help your loved ones with this cost later in life.
How to have more than one life insurance policy
Having more than one life insurance policy is usually not difficult because insurance companies do not limit the number of policies you can have. In fact, you can have more than one life insurance company with the same insurer.
However, what insurers limit is the amount of total coverage you can have, usually capped at around 20 to 30 times your annual income. The insurance term for this is your insurability limit. Insurance companies impose this limit because life insurance is meant to replace your income.
Also, depending on the policy details, such as the amount of coverage, you may need to provide proof of income and assets. But in general, there’s no reason why you can’t have two or more fonts.
Here are two ways to have more than one insurance policy:
Scale is a useful strategy because of our often changing financial goals. In many cases, we don’t need as much coverage later in life. So you could have three-term life insurance policies: a 30-year policy, a 20-year policy, and a 10-year policy. Each policy has a different coverage amount, with the 10-year policy being the highest and the 30-year policy being the lowest.
2. Buy different types of insurance
You can also decide to buy, for example, both a whole life insurance policy and a term life insurance policy. For example, you could purchase a whole life insurance policy with just enough coverage to cover your partner’s basic needs in the event of an untimely death. You could then add a term life insurance policy to help support your children.
It’s worth noting that it doesn’t matter if you have two whole life policies, two-term policies, or if you mix and match each. What matters is that the coverage amount and the type of coverage you have matches your overall financial goals.
There are reasons why you might want to have more than one insurance policy, like when you have a kid or move into a bigger house. Insurers generally don’t care if you have more than one policy, but they tend to limit your coverage to around 20 to 30 times your income. Therefore, you may need to provide proof of income and assets when purchasing a new policy.
Tips for buying life insurance
Planning your finances for the next 10, 20 or 30 years can be difficult. Working with a financial advisor can be helpful as they can help you develop a strategy to provide financial security for your loved ones. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to three financial advisors who serve your area, and you can interview your advisors at no cost to decide which one is best for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.
Once you have decided that you are ready to purchase a life insurance plan, you should compare life insurance quotes. Like anything else, it’s important to compare prices so you can choose the plan that gives you the benefits you need at an affordable price.
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