Can You Have More Than One Life Insurance Policy? - SmartAsset

You’re legally permitted to own multiple life insurances, though life insurance companies may be more concerned about your total benefits. Carrying multiple life insurance policies can give you access to more coverage and better peace of mind. In this article, we cover what you need to know about buying more than one life insurance policy. However, if you’re thinking about utilizing multiple life insurance policies then 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 a single type of insurance policy. There are two main categories of life insurance: term life and whole life. Each behaves differently and the right one for you will depend on what your goals are. Let’s take a look at what each one does and whether you should buy the same types of life insurance or if it’s better to mix and match.

Term Life

Term life is insurance that expires after a certain number of years, such as 20 or 30 years. If you pass away before the policy expires, it pays out the amount specified. However, it won’t pay out anything if you are still alive after the policy expires. You can renew the policy, but the rate may be much higher if you wait until it expires to renew it. These policies are popular because the premiums are lower than they are for whole life insurance.

Whole Life

Whole life insurance doesn’t have an expiration date like term life insurance does. It also builds up a cash value that can serve many purposes, such as tax-advantaged retirement savings. The lack of expiration on whole life insurance can be appealing, but they tend to have higher premiums than term life policies.

Reasons for Having Multiple Insurance Policies

For many people, a single life insurance policy is enough. But there are some reasons you might want more than one policy. Consider the following scenarios:

Changing financial goals: Our lives are not static, and that means our financial goals often aren’t, either. Perhaps you have a baby or move into a bigger house. These things can be exciting, but they can also increase your financial obligations. Hence, you might find that your current life insurance policy is insufficient.
Supplementing an existing policy: There are many different types of life insurance, as we have seen. But you might also have a policy through work, for example, that you want to supplement. That could be good both to increase your coverage and because you likely won’t be able to keep your group policy if you leave your job.
Adding long-term-care coverage: Long-term care is a significant expense. Adding an additional policy can be helpful if you want to help your loved ones pay for this cost later in life.

How to Have More Than One Life Insurance Policy

Having more than one life insurance policy is generally not difficult because insurance companies don’t put limits on 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 do 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 particulars of the policy, such as the coverage amount, you might have to provide proof of income and assets. But in general, there is no reason you can’t have two or more policies.

Here are two ways you might go about having more than one insurance policy:

1. Laddering

Laddering is a useful strategy because of our oft-changing financial goals. In many cases, we don’t need as much coverage later in life. So, you might have three-term life 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 most and the 30-year policy being the least.

2. Buy Different Types of Insurance

You might also decide to buy, for example, both a whole life insurance policy, plus a term life policy. For instance, you might buy a whole life policy with just enough coverage to cover your partner’s basic needs in case of your untimely death. You might then add a term life policy to help provide for your children.

It should be noted that it does not matter if you have two whole life policies, two-term policies or if you mix and match each. What matters is that the amount of coverage and type of coverage you have matches your overall financial goals.

Bottom Line

There are reasons you might want to have more than one insurance policy, such as when you have a child or move into a bigger house. Insurers don’t usually mind if you have more than one policy, but they do tend to limit your coverage to around 20 to 30 times your income. As a result, you might have to provide proof of income and assets when buying a new policy.

Tips for Buying Life Insurance

Planning for the next 10, 20 or 30 years of your finances can be challenging. Working with a financial advisor can be useful as they can help you put together a strategy to keep your loved ones financially secure. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Once you have decided you’re ready to get a life insurance plan, you should compare life insurance quotes. As with anything else, it’s important to compare prices so that you can choose the plan that gives you the benefit you need at an affordable price.