Can you have more than one life insurance policy?
It’s possible to have more than one life insurance policy. Owning multiple policies may make sense in several situations. For example, you may purchase a separate policy to supplement a small group insurance policy through your employer. Or, you might purchase additional coverage for a specific goal, like paying off your mortgage after death. However, buying multiple life insurance policies isn’t right for everyone — sometimes, it might be best to pursue alternative strategies.
Key takeaways
- There are no laws, rules or regulations around the number of life insurance policies an individual can have, so it is technically possible to have as many life insurance policies as you want.
- Purchasing multiple life insurance policies might make sense in certain circumstances, such as if you need more coverage or want coverage for a specific life event.
- Having multiple policies can form part of a larger financial plan, called a ladder strategy, which involves buying several term life policies with varying term lengths.
- Alternatives to buying multiple policies include raising your coverage limit or purchasing life insurance riders.
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Whole life insurance combines life insurance with an investment component.
- Coverage for life
- Tax-deferred savings benefit if premiums are paid
- 3 variations of permanent insurance: whole life, universal life and variable life include investment component
Term life insurance is precisely what the name implies: an insurance policy that is good for a specific term of time.
- Fixed premium over term
- No savings benefits
- Outliving policy or policy cancellation results in no money back
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How many life insurance policies can you have?
Technically speaking, you can purchase as many life insurance policies as you want. There are no laws, rules or regulations around the number of policies that one individual can have. Cost is the main parameter to consider when it comes to the feasibility of maintaining numerous policies. As long as you can afford the premiums and your applications are accepted, you can purchase and maintain as many life insurance policies as you wish.
In addition, you can purchase any combination of life insurance policies that you choose. For example, you could purchase two term life insurance policies and one whole life insurance policy. However, there are pros and cons to purchasing more than one policy, and if you choose to buy more than one term policy, there is generally a strategy to doing so.
When is multiple life insurance policies a good idea?
Purchasing multiple life insurance policies might make sense in several circumstances.But keep in mind that purchasing multiple policies at once should be strategic and is an approach that may not make sense for everybody. Here are some instances where it could be beneficial to buy two or more life insurance policies:
You need more coverage
The most common reason to purchase multiple life insurance policies is to get more coverage or a higher death benefit. This is often the case for people who have a low-cost group life insurance policy through their employer but need more coverage than what their employer-sponsored policy can offer. You might choose to buy two term policies, one term and one permanent life insurance policy or some other combination of coverage. To estimate how much life insurance you need, consider your financial obligations and whether you want a policy large enough to take care of your loved ones after your death. If you need help, consider reaching out to a life insurance agent.
You want coverage for a specific life event
Some people may choose to buy a second or third life insurance policy if they need more coverage for a specific life event. For example, if you are growing your family and want extra financial protection for your kids until they become adults, you might consider buying a second term life insurance policy that can offer that protection for 15 or 20 years. You might also consider buying another policy while you pay off your mortgage or a small business loan. This may offer financial support to cover your debts if you were to die before a loan is paid off.
You have a financial strategy
Having multiple life insurance policies can be part of a larger financial plan, called a ladder strategy. This approach involves purchasing several term life insurance policies with varying term lengths. Over time, the policies expire at different rates as you pay off debts. When the ladder strategy works correctly, you are generally able to pay a lower premium with multiple policies than you are with one high-coverage policy. However, be aware that this approach typically involves complex planning and is generally done best under the guidance of a licensed financial advisor.
Is it okay to apply to multiple insurers at once?
Applying to multiple insurance companies simultaneously for new coverage is not recommended by most insurance experts. When you submit a life insurance application, your request gets recorded in the Medical Information Bureau (MIB), which exchanges confidential coded data about medical conditions and risk factors to alert insurers of potential omissions or errors in applicants’ reported medical histories. When the MIB shows multiple applications, it can make it look like you are applying for more coverage than you really need, which could ultimately lead to denied coverage. Any alerts from the MIB may prompt further investigation by the insurer but cannot alone justify an adverse underwriting decision.
What are the alternatives to buying multiple life insurance policies?
Purchasing multiple life insurance policies may not be the best option for everyone. As a financial strategy, problems may arise if this plan is not approached correctly. If you need more coverage and are debating a second policy, you may want to consider these alternative options first.
Raise your coverage limit
The easiest way to get more life insurance coverage is usually to simply increase the coverage limit on your existing policy, assuming you have not maxed out your policy’s limit already. Raising your coverage limit will likely increase your premium, but the cost of your life insurance policy will depend on how much additional coverage you need. You may also be subject to medical underwriting — a process an insurer performs to evaluate your medical history to assess your health, which helps them determine whether to approve your request for additional coverage and how much extra you’re charged.
Purchase riders
If you need more life insurance coverage, you might consider purchasing life insurance riders. Insurance riders are essentially add-on coverages that offer financial protection in specific areas and fill gaps in coverage. Some of the most common life insurance endorsements are long-term care riders, accelerated death benefit riders, accidental death riders and child term riders.
Frequently asked questions
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The best life insurance company depends on the type of policy you want, the amount of coverage you need, your age, your overall health, your budget and more. Some of the top life insurance companies based on market share, financial strength and customer reviews are Guardian, Mass Mutual, Mutual of Omaha, Northwestern Mutual and Nationwide.
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Most insurance experts agree that you should have enough life insurance to cover your family’s financial needs without your income if you were to pass away. To determine how much coverage to buy, add your sources of income together and subtract your debts or recurring costs, like a mortgage. The value left over is the amount of life insurance you might consider.
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In states where it is allowed, insurance companies may assess your credit-based insurance score when reviewing your application. Use of this type of credit check shouldn’t affect your credit score.
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The best life insurance for married couples depends on you and your spouse’s unique financial circumstances and goals. Purchasing more than one policy might make sense if you have children or depend on each other’s income. You could also buy a joint policy covering you and your partner. If you need help deciding which route to take, consider contacting a licensed life insurance agent.
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