You may wonder if it’s possible to have multiple life insurance policies? The answer is yes! Here we explain some possible scenarios.
Should you consider multiple life insurance policies?
Over time, your financial needs and goals may very likely change. That is why your life insurance coverage could also warrant 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 another small term policy specifically for final expenses.
Another example may be if you have a small life insurance policy through your employer but would like to ensure additional coverage to protect your family and loved ones. That may be another case when more than one policy is needed to provide a level of desired protection.
Owning more than one life insurance policy
Here are some things to consider as you contemplate whether or not owning more than one life insurance policy is right for you.
Insurability limits
There are no legal limits as to how many life insurance policies you can own. However, 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, be sure you can afford the expense of maintaining your policies to keep them in-force. 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.
Insurability limits vary by age and by insurer, but generally range from 15 – 35 times annual income. Note that insurability limits apply to the total amount of coverage, not per policy.
Alternatives to multiple policies
If 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. With the guaranteed insurability rider, the life insurance company will offer you the additional coverage regardless of your health. It's important to note that you'll be paying premiums that reflect your current age when purchasing your additional coverage.
Here is a list of questions to consider when thinking about increasing life insurance coverage, whether through another policy, a rider, etc**:
- Have I experienced life events recently that have increased my need for life insurance? (These may be milestones like getting married, having a child, etc.)
- Are there additional financial burdens that my family has undertaken that life insurance could help protect? (Purchasing a new home, enrolling a child in college, caring for an elderly family member, etc.)
- Has my income or work situation changed creating more annual income than I was bringing in when I first signed up for life insurance?
While not an additional policy, if you have a term life policy, it may have included 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. 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!
*As long as required premium payments are timely made.
** https://www.forbes.com/advisor/life-insurance/more-than-one-policy/
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