Can You Have More Than One Life Insurance Policy?

In this article...
  • Find out if you can have more than one life insurance policy and why you may wish to. Get the facts needed to make the right decision about your coverage.

Buying life insurance helps ensure that your loved ones have access to funds to pay for your burial, settle your debts and keep up their standard of living if you die. Many people only need one life insurance policy, but in some cases, you may wish to own multiple policies. Learning when you can have more than one life insurance policy and what the benefits of additional coverage are can help you make an informed decision as you compare insurers and policies.

Can You Have More Than One Life Insurance Policy?

Generally, you can own more than one life insurance policy. Each time that you apply for life insurance, the application asks you to list any policies that you already own. In most cases, insurers won't question the existence of multiple policies.

If your total amount of life insurance is far more than your annual income, you may be asked to do the following during the underwriting process:

  • Explain why you need more insurance
  • Provide proof of your income and asset
  • Undergo additional tests during your life insurance physical, such as an EKG or stress test

What Happens If You Have More Than One Life Insurance Policy?

If you have more than one life insurance policy, you'll pay monthly premiums on each one. When you die, your beneficiaries will file a death benefits claim for each policy. Money will usually be paid out separately for each policy that you own.

Can I Claim Life Insurance From Two Different Companies?

Yes, you can purchase life insurance from more than one company. You can name the same beneficiary on every policy or have different beneficiaries. A beneficiary of a life insurance policy can make death benefit claims with multiple insurance companies in the event of your death.

Why You May Want More Than One Policy

Not everyone needs more than one life insurance policy, but under certain circumstances, multiple policies may be beneficial.

Anticipated Changes in Your Financial Needs

Generally, you need more life insurance when you're younger. You may have more expenses, such as a mortgage payment on your first home or the costs of raising children.

Taking out multiple term life insurance policies is a simple way to gradually lower your total amount of life insurance over time. For example, you could buy:

  • One 10-year policy for $50,000
  • One 20-year policy for $30,000
  • One 30-year policy for $20,000

For the first 10 years, your beneficiaries would receive a death benefit of $100,000. Starting in year 11, they'd get $50,000. Beginning in year 21, the death benefit would drop to $20,000. This structuring of insurance policies is called laddering.

Supplementing Group Life Insurance

Many employers offer voluntary employee life insurance. Usually, the policies provided through employers are term life, and you may lose coverage if you leave or change jobs or retire. Having a second individual life insurance policy helps you remain covered during your job search or if you decide to quit and open your own business.

Accomplishing Your Financial Goals

Term life insurance generally allows you to get a larger death benefit for a smaller premium. As a result, it may be the best option for replacing income or settling a debt. Whole life insurance builds up a cash value that you can use to pay for future expenses or pass on to your heirs. You may choose to own one term and one whole life insurance policy to reap the benefits of both types of insurance.

New Debts and Responsibilities

If you have another child, buy a home or acquire another sizable debt or financial obligation, you may need more life insurance than what you currently have. A second life insurance policy can help cover those new expenses. For example, if you take out a 30-year mortgage, you could buy 30-year term life insurance in the same amount as the loan. The coverage would expire around the same time that you pay off the mortgage.

Business vs. Personal Expenses

Small business owners may wish to have separate life insurance policies to provide for their families and keep their companies afloat if they die. If you have a business partner, you may need a life insurance policy to settle a buy-sell agreement. Under this arrangement, all partners in a business take out life insurance policies on each other. If a partner dies, the death benefit is used to buy out that person's share in the company.

Planning for Long-Term Care

Some life insurance policies offer coverage for long-term care. You may not need this type of coverage early in life, but as you age, buying a second policy with this benefit can help to ensure that you can afford the cost of an assisted living or nursing home.

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