Updated December 8, 2020|6 min read
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It’s totally possible — and legal — to have multiple life insurance policies. Many people have life insurance coverage through their employer in addition to their own term life policy or permanent life insurance policy. But there are also benefits to having more than two life insurance policies.
While you will need a good financial reason to increase your death benefit, like taking on a large loan, you might like to buy coverage just for the length and amount of that loan. Some people buy multiple policies that expire as they age to save money on their premiums over time. However, submitting insurance applications to multiple companies at the same time can cause confusion and may result in being denied coverage if an insurer thinks you’re hoping to get more coverage than you actually need. A financial adviser or independent insurance broker can help you decide which type of policies to buy.
You can have more than one life insurance policy at the same time
Many people buy multiple policies to get additional coverage or to save money long-term
Applying to multiple insurers at once can cause application delays and should be avoided
Many people opt into the group life insurance offered by an employer because it’s subsidized in part or whole by their company. But those policies don’t offer as much coverage as you actually need. Even if you already have a private policy separate from the one offered by your employer, there are a few situations in which it could be advantageous to take on another.
Life insurance is meant to encompass the needs of your income, your debts, and your dependents. If you experience major life changes — buying a house, getting married, having a child, or starting a business, — that significantly impact your finances, it makes sense to increase the amount of life insurance coverage you have. That could mean buying another life insurance policy rather than increasing the coverage limit on your current policy.
Depending on how much additional coverage you want, buying a new policy may ultimately cost less than increasing the coverage on your existing policy. And with a term life policy, you can buy new coverage with a term length tailored to your life event, like a policy that lasts for the length of a business loan or for the number of years you plan to financially support your child.
There are many ways to make life insurance part of your long-term financial plan. The most common is called the ladder strategy, which involves buying multiple term life insurance policies with different term lengths that expire as you pay down your debts.
For example, you could buy a 10-, 20-, and 30-year term policy in decreasing coverage amounts. If they go in force around the same time, you have the highest combined amount of coverage for the first 10 years, when the combined expenses of childcare and a mortgage is likely highest. Then your coverage amounts gradually decrease as your policies expire and your debt and number of dependents decrease.
The ladder strategy may allow you to pay lower premiums over the lifetime of multiple policies than if you paid a single premium for the life of one higher-coverage policy. Since this strategy can be complicated to manage, we recommend working with a financial planner or adviser to discuss your options.
It’s rare for a life insurance company to go out of business, and rarer still for there to be no resolution in place if a company does face that worst-case scenario. But you may not like the idea of relying on one company to guarantee your beneficiaries’ future financial support.
If guarding against this risk is extra important to you, holding policies with multiple companies allows you to spread that risk across more than one provider. If one does go out of business, your beneficiaries won’t be without financial protection while you sort out the coverage you had with the defunct insurer.
Technically, you can apply for a policy with several life insurance companies at the same time. But it rarely makes sense to do so because having multiple life insurance applications out can overcomplicate the application process. If you want to buy more than one policy at the same time, an insurance agent or broker can help you get the details right, and it may be more efficient if you work with one insurer.
Life insurance companies share information about applications and policies through the Medical Information Bureau (MIB). All of your life insurance applications are logged there, to ensure that multiple companies aren’t insuring you beyond your insurability limits. Your insurability is the amount of life insurance coverage you can reasonably purchase based on your income, outstanding debts, assets, and dependents.
If you apply to two insurers at the same time to see which offers the lowest premiums, you could be denied by both because it looks like you’re trying to apply for double the coverage amount that you actually need. At the very least, your applications could be delayed while the insurance companies sort out the information on your MIB report, and you may have to undergo multiple medical exams.
Working with a life insurance agent or independent broker like Policygenius to compare life insurance quotes can help you find the best and most affordable life insurance company for your particular situation. If you want to buy more than one policy, an agent can help you decide how to split up your coverage across policies in a way that won’t raise flags or slow down your application. And if your first application doesn’t work out — for example, your medical tests come back and your premiums are higher than your initial quote — a broker can work with the insurer to negotiate a better premium or suggest applying with a different insurer that may present a better offer.
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If you want additional coverage but don’t want to apply for a brand new policy, you can alter or increase your coverage directly with your current life insurance provider.
Riders are an easy way to customize or add coverage to an existing policy. Some riders may have been added to your policy automatically for free, like a term conversion rider, which allows you to turn your term insurance into a whole life policy after the term expires. Other riders may come at an added cost set by your insurer, but may be less expensive than a separate standalone policy.
So if you get married, for example, you can add a spousal rider to your policy. The spousal rider provides a smaller death benefit than a standalone policy for your spouse, but may also cost less in additional premiums.
If you experience a major life event that affects your financial needs, your insurability will also change and you may be able to increase the size of your policy’s death benefit. Increasing your death benefit amount isn’t as simple as asking and increasing your premiums, however. Unless you’re increasing your coverage within the first 12 months of your policy, your medical exam results are unlikely to be accepted by your insurer and you’ll need to go through underwriting again to secure updated coverage and premiums.
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Buying multiple life insurance policies can be a smart way to get additional coverage to insure against a specific debt, like a mortgage, or if you want to implement a more complicated financial strategy, like the ladder strategy. Avoid applying to multiple insurers at the same time to prevent complications and delays, but do work with an agent or independent broker to make sure that you are getting the right policies and prices for your needs.
You can have more than one insurance policy, but it depends on how much coverage the different policies offer. Life insurance companies will deny additional policy applications if the policyholder is over-insured. Usually, your income, assets, and liabilities will dictate how many policies and how much coverage you have.
If you and your spouse are shopping for life insurance together, it’s possible to get a joint life insurance policy or two separate life insurance policies. Joint life insurance is a permanent policy that protects both spouses but is typically more expensive and complicated than separate life insurance policies. Separate term life policies make the most sense for most spouses, with some exceptions.
Although you can apply for as many policies as you’d like simultaneously, we don’t recommend doing this. Insurance companies all share the same database to track applications and records, so if you apply for multiple policies, they might think you’re applying for more insurance than you need. This can lead to an application denial from one or several insurers that can be avoided by applying one at a time. The best option is to work with a professional agent to compare quotes before you apply.
Find out what you need to know before making this important purchase.
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