Life insurance can offer valuable financial stability for your loved ones in the event that you pass away unexpectedly. There are several different kinds of life insurance that are available based on your family’s lifestyle, your current income and your budget.
When you buy a life insurance policy, you get to choose how much coverage you want, which is called the death benefit. But if you want even more protection, you might be wondering if you can have multiple life insurance policies.
How many life insurance policies can I buy?
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. You could purchase two policies or 10 policies, it just depends on your coverage needs and how much money you can afford to spend.
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 permanent life insurance policy. However, there are pros and cons to purchasing more than one policy, and if you choose to buy more than one policy, there is a strategy to doing so.
When is multiple life insurance policies a good idea?
There are several situations when it makes sense to buy multiple life insurance policies. Keep in mind that purchasing multiple policies at once should be strategic and that it is a strategy that does not make sense for everybody. Here are some of the instances when you might decide to buy two or more life insurance policies:
You need more coverage
The first and 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.
You want coverage for a specific life event
Some people 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 protection until your kids become adults, you might choose to buy a second term life insurance policy that can offer that protection for 15 or 20 years only. You might also buy another policy while you pay off your mortgage or a small business loan.
You want to mitigate risk
Most life insurance companies are financially strong, but there is no guarantee that your provider will still be in business at the time of your death. If the provider closes shop, there is a chance that your beneficiaries will not be able to access your death benefit. Having multiple life insurance policies from different providers mitigates the risk and ensures your loved ones will get financial support, even if one company goes out of business.
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, like a mortgage. With the ladder strategy, you are able to pay a lower premium with multiple policies than you are with one, high-coverage policy.
Is it okay to apply to multiple insurers at once?
Applying to multiple insurance companies at once is not recommended. When you submit a life insurance application, your request gets recorded in the Medical Information Bureau (MIB), which tells life insurance companies how much coverage you are eligible for. When the MIB shows multiple applications, it can make it look like you are applying for more coverage than you really need, which can ultimately lead to denied coverage.
What are the alternatives?
Purchasing multiple life insurance policies is not the best option for everyone. Consider it a financial strategy. Problems can arise if the strategy is not approached correctly. If you need more coverage and are debating a second policy, consider these alternative options first.
Raise your coverage limit
The easiest way to get more life insurance coverage is 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 subsequently increase your premium, but the cost of the rate increase will depend on how much additional coverage you need.
If you need more life insurance coverage, you might consider purchasing life insurance riders. Insurance riders are essentially add-on coverages that offer 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 children’s riders.
Explore other investment options
Instead of buying multiple life insurance policies to save money on your premium, consider choosing a permanent life insurance policy with an investment component. Universal life insurance and variable universal life insurance policies allow you to use the policy’s cash value to fully or partially cover the cost of your premium, so you do not have to pay out-of-pocket.
Frequently asked questions
What is the best life insurance company?
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 MetLife, Prudential Financial, Haven and MassMutual.
How much life insurance do I need?
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 should get.
What impacts my life insurance rates?
Like most insurance rates, life insurance premiums are personalized. Life insurance companies look at factors like your age, gender, overall health, pre-existing conditions, family history of disease, the amount of coverage you need and riders.