Should you consider multiple life insurance policies?
Owning more than one life insurance policy
Over time, your financial needs and goals may very likely change. That is why your life insurance coverage would also need to change, increasing with your assets and responsibilities. In fact, there may come a time in your life when having a single policy is no longer enough to meet your specific needs and you find yourself contacting a life insurance company for additional coverage.
Having multiple life insurance policies is more common than you might think. For example, you may have a small whole life policy dating back to when you were an infant, and today - as an adult with financial dependents - need a second policy to cover the needs of a growing family. Or, you may have a permanent life insurance policy to cover the balance of your mortgage, and yet another small term policy specifically for final expenses.
Fortunately, there are no legal limits as to how many life insurance policies you can own. However, while many life insurance companies generally have very little concern over the number of policies you own, they may look more closely at the total amount of your benefits. For this reason, you want to be certain that the benefits you are applying for are no more than what would be reasonable for a person with your expected income level and assets. In other words, you must qualify financially for the total benefit for which you are applying. Additionally, if you have one policy with a life insurance company and decide that you want more, the insurer may require a medical exam to evaluate your insurability.
Alternatives to multiple policiesIf you think you might need additional coverage in the future or find yourself adding and dropping coverage to meet specific needs, you may want to consider including a policy rider when you purchase a policy. For example, a guaranteed insurability rider could give you the option to purchase additional life insurance coverage at a later date, without undergoing a medical exam or providing any evidence of your insurability. Unfortunately, you never know how your health could change. Including this rider can make sense because it could allow you to buy additional insurance at certain intervals, say every few years or at a certain age or life event. However, while the life company will offer you more coverage regardless of your health, they will likely consider your age when deciding on your premium.
If you have a term life policy, you may want to consider a term conversion rider. With this option, you could convert a portion of your term policy every few years as outlined in your contract, into permanent life insurance (such as whole or universal life) without undergoing a medical exam. Depending on your policy, you'll most likely have a deadline as to when you must use this option without being subject to an exam, so check your policy.
The bottom line is that there are many different types of life insurance policies because people have different needs. In the future, you too may find that it is necessary to carry a variety of life insurance products. For this reason, it's essential to review your coverage on a regular basis to make sure that what you have is keeping up with you!