Should I apply to multiple life insurance companies?

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Should I apply to multiple life insurance companies?

You can own multiple life insurance policies from different companies or the same company. Some advanced financial strategies, such as the ladder strategy, advocate for owning multiple life insurance policies.

There are other reasons having multiple life insurance policies makes sense. It could be that you want a policy with a shorter term for specific reasons, you can get a better deal on premiums by adding a second plan instead of getting a single, more expensive policy, or you’ve had changes in your life circumstances that require more coverage.

But if you decide on getting multiple policies, should you apply to multiple insurance companies or stick with a single provider?

Can you apply to multiple life insurance companies?

The first question most people ask isn’t should they apply to multiple life insurance companies, but if they can. As in, are they legally allowed to.

The short answer: yes.

The longer answer: yes, but with some reservations.

You’re more than welcome to apply for multiple life insurance policies, either at the same company or different companies. Obviously an insurer would love if you did all of your business with them, but there isn’t anything they can do if you decide to look around at other companies.

What insurers do care about, though, is the number of policies you have. First, they want to make sure you can cover the premiums. If you’re applying for life insurance policies at half a dozen companies and you aren’t in the 1%, there’s a good chance you won’t be approved.

Insurers will also be concerned about the level of coverage you’re getting. If you’re young, single, and don’t make all that much money and you’re trying to get a million dollars in coverage, that might raise a red flag. They’re on the lookout for fraud, so while you can apply to multiple companies, applying for too much coverage could be suspicious. Which isn’t to say you won’t get approved, but it will delay the process while you’re vetted.

Good agents and brokers won’t sell you more insurance than you need. If they’re trying to push additional coverage on you that doesn’t seem necessary, you should be wary of it.

Why you should apply to multiple insurers

Okay, so you can apply to multiple insurers. Naturally, the next question is if you should even bother doing so in the first place. There are a few instances when you might consider it.

Increase your options

Not every life insurance policy is created equal. As you can see in our life insurer reviews, some policies have unique features like being more compatible for people with complicated medical histories or having customizable terms. Maybe you see a plan with some features you’d like at one insurer, but another insurer has a plan that best covers you in other ways.

Mitigate risk

Maybe you’re a worrier and you’re afraid that your life insurer is going to fold. What happens to your policy? Did you pay all of those premiums for nothing? Do you have to go through the whole application process again?

It’s very rare that a life insurance company goes out of business, and you can pick a good carrier by doing your research and checking its ratings at different bureaus. Still, anything can happen. If you have your policy with a single company, you’ll leave yourself exposed for a period of time. If you are working with multiple companies, though, you’ll still have at least one policy in place if one of the insurers takes a turn for the worse. For some people, this added level of protection is important.

Why you shouldn’t apply to multiple insurers

You might find yourself in a situation where applying to multiple life insurance companies makes sense. However, oftentimes doing so could make things more difficult for you and complicate your application process.

Delays in your application(s)

As mentioned, getting more than one plan is legal, but an insurance company might do a little more legwork to make sure everything is on the up and up. If you’re using the same company for multiple policies, this process goes a little quicker because they know what products you already have and can better evaluate your coverage and needs. But if you’re going through multiple companies, it can take a little longer for a company to do their due diligence and check up on what other policies you own.

Dealing with multiple companies

The obvious downside of having to deal with more than one company is you have to deal with more than one company. That means if you need to update your contact information or payment method, you have to do it in more than one place. If you change your beneficiaries, you’ll have to make sure you do it everywhere. This might not end up being a huge deal – ideally, you won’t need to get in touch with your insurer very often – but it’s an added hassle that may not be worth it.

More expenses

If you’re applying to multiple life insurance companies, that means that you’re applying for multiple policies, and that means that you’ll be on the hook for multiple premiums. Life insurance isn’t particularly expensive for the protection you get, but if you’re paying premiums on multiple policies each month, that can add up quickly. A good life insurer or agent will take a look at what you’re able to afford so you don’t end up biting off more than you can chew, but it’s important to make sure you don’t get yourself in over your head.

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So should you apply to multiple life insurance companies? For most people, the answer is no. Ideally you’ll assess your financial needs appropriately and get the proper amount of coverage, and even if you do need to make changes based on life circumstances, if you’re happy with your current provider you can make changes with them. The hassle and confusion of having to keep up with multiple policies at multiple companies isn’t worth the benefits for many people, and you’d be better off keeping your business with a single life insurer.

Image: Marcus Mailov