Yes, you can have more than one life insurance policy. There is no legal limit to the number of life insurance policies you can have. In fact, having multiple policies can be a good strategy to ensure that you have enough coverage to meet your needs.
However, when you apply for a life insurance policy, you will need to disclose any other policies you have in force. This is because insurance companies want to make sure that you are not over-insured, which can lead to fraud or other issues. They will also take into consideration your overall coverage when determining your premiums and eligibility for coverage.
It’s important to keep in mind that having multiple policies can also mean higher premiums, so it’s important to carefully consider your coverage needs and budget before taking out multiple policies. It’s also a good idea to work with a licensed insurance agent or financial advisor who can help you navigate the options and choose the right coverage for your situation.
Top 7 Reasons to Own Multiple Life Insurance Policies
#1. You need more insurance.
As one grows older, it’s not all that uncommon for a person who already owns a life insurance policy on themselves to realize that the coverage that they have in place isn’t going to be enough. This is particularly true if the person in question first purchased their original life insurance policy in their 20s or 30s.
#2. Multiple Life Insurance Policies as a strategy.
Sometimes individuals will choose to purchase multiple life insurance policies for themselves as a “money-saving” strategy. A strategy that is often referred to as “laddering” coverage. In situations like these, an insured may realize that over the next 30 years, they will need about 500,000 dollars in coverage to protect their family. The only problem is that they don’t actually need 500,000 dollars in coverage for that entire time because some of their insurance needs will decline as time goes by.
Let’s consider a hypothetical scenario of a married individual in their mid-40s with two children aged 10 and 14, who believes they need $500,000 in life insurance coverage to protect their family adequately. Typically, the insurance needs of this person will be highest for the next 10-15 years while their children are still financially dependent on them.
After their children become financially independent, their insurance needs will likely decrease significantly. Therefore, it may be more financially beneficial for this client to purchase two separate life insurance policies with varying term lengths that together provide a total of $500,000 in coverage. For example, they could purchase a 15-year $250,000 term life insurance policy and a 30-year $250,000 term life insurance policy.
This approach ensures that the insured has the necessary coverage of $500,000 during the years when their insurance needs are the highest. Once their insurance needs decrease, they can let one of the policies expire and continue with the remaining policy, saving them from having to pay for coverage that they no longer need.
Overall, purchasing multiple life insurance policies can be a good strategy for individuals who have changing life circumstances and varying insurance needs over time. Working with a licensed insurance agent or financial advisor can help in selecting the right coverage options that meet your specific needs and budget.
#3. Collateral for a small business loan.
Sometimes an individual may find themselves in a situation where as part of a loan application, they need to purchase a corresponding term life insurance policy that can be used as collateral while the loan is being paid back.
In situations like these, purchasing a new life insurance policy may not always be necessary if someone is willing to make changes to an existing policy they have in place. However, in our experience, individuals tend to prefer leaving their existing policy as it is and instead buying a separate policy tailored to meet their specific needs.
Moreover, in such cases, we recommend exploring no medical exam life insurance policies. These types of policies typically have a faster approval process, enabling one to qualify for the loan quickly.
Overall, it’s important to assess your insurance needs and explore all available options before making a decision. Seeking the guidance of a licensed insurance agent or financial advisor can help you in selecting the most suitable coverage option that fits your specific requirements and budget.
- Buy/sell agreement.
Individuals may opt to purchase a separate life insurance policy, in addition to the one specifically designed to protect their family, to finance a buy/sell agreement between partners in a business. This approach ensures that, in the event of the untimely death of one business partner, the surviving partner will receive sufficient funds to “buy out” the deceased partner’s family, enabling the business to continue with only the surviving partner in charge.
Life insurance policies purchased for this purpose can ensure that the surviving members of a business partnership are adequately compensated for their loved one’s share of the business without placing additional financial strain on the existing business. This strategy also offers peace of mind to both partners, knowing that their loved ones will be financially protected in the event of their premature death.
- Need a policy to satisfy a divorce decree.
Sometimes it will be a judge who decides that someone may need to purchase a second life insurance policy on themselves so that the agreed divorce settlement can be protected. This way, one spouse can ensure that any agreement on alimony or child support payments will be protected or “insured” if the individual responsible for making these payments dies prematurely.
Applicants looking for a life insurance policy, for this reason, may also want to see if they can qualify for a no medical exam life insurance policy since it may speed up the process of finalizing their divorce.
- Looking to take advantage of certain tax-saving strategies.
Individuals will also choose to purchase multiple life insurance policies for themselves to achieve different goals. For example, someone may choose to purchase an inexpensive term life insurance policy for the sole purpose of obtaining an adequate “death benefit” for their loved ones in the event that they die prematurely while simultaneously purchasing a whole life insurance policy for the purposes of utilizing many potential tax-saving strategies that can only be achieved through a whole life insurance policy (think Infinite Banking Concept).
In cases like these it may make sense to own two different life insurance policies on oneself since each will be used to achieve a different objective other than just protecting the finical future of your family.
- Can’t qualify for a traditional life insurance policy.
Lastly, sometimes folks won’t be able to qualify for a traditional term or whole life insurance policy. Now, this may be because of a pre-existing medical condition, trouble with the law (previous felonies) or because they are currently receiving some type of disability benefit. As a result, some clients may choose to apply for a guaranteed issue life insurance policy that won’t require one to “medically” qualify or ask any questions regarding their past.
“Which is great!”
It’s worth noting that some types of life insurance policies only offer coverage up to around $25,000. If someone wishes to purchase more coverage than this, they may need to buy multiple policies from different insurance companies.
These seven reasons provide a general idea of why someone might choose to purchase multiple life insurance policies on themselves and how different types of life insurance policies can come into play in achieving desired goals.
While these reasons are essential to consider, it’s important to note that they’re not the only reasons why someone may choose to purchase multiple life insurance policies. At IBUSA, we encourage anyone considering buying a second life insurance policy or purchasing two different policies simultaneously to contact us first. As experts in helping individuals qualify for excellent coverage, we have access to dozens of different life insurance companies, allowing us to tailor the coverage to meet our clients’ unique needs. We don’t rely on a “one size fits all approach,” and we’ll work with you to find the right company and coverage for you.
Frequently asked questions
Is it legal to own multiple life insurance policies?
- Yes, it is legal to own multiple life insurance policies. There is no legal limit on the number of life insurance policies you can have, and it’s not uncommon for people to own more than one policy to meet their financial needs and goals. However, keep in mind that each policy will have its own premiums, terms, and conditions, so it’s important to carefully evaluate the costs and benefits of each policy to ensure that they align with your overall financial plan. Additionally, it’s important to disclose all of your existing life insurance policies when applying for new coverage to avoid any potential issues or claims disputes in the future.
What are the benefits of owning multiple life insurance policies?
- There are several benefits to owning multiple life insurance policies, including having the ability to tailor coverage to your specific needs, ensuring that your beneficiaries receive adequate financial support in the event of your death, and potentially saving money by combining policies from different insurance providers.
Can I have multiple policies with the same insurance company?
- Yes, you can have multiple life insurance policies with the same insurance company. Some insurance companies even offer discounts for policyholders who have multiple policies with them. However, it’s important to carefully evaluate your insurance needs and make sure that having multiple policies with the same company makes sense for your financial goals and budget. Additionally, having multiple policies with the same insurer can make it easier to manage your coverage, as you’ll only need to deal with one company for any policy-related issues or claims.
Can I apply for multiple policies at the same time?
- Yes, you can apply for multiple life insurance policies at the same time. However, keep in mind that each insurance company will have their own underwriting process, which means you may have to go through multiple medical exams and provide extensive personal and financial information for each application. Applying for multiple policies at once can also affect your overall insurability and premiums, as insurers will consider the combined coverage amount when assessing your risk level. It’s important to consult with an experienced insurance agent or financial advisor before applying for multiple policies to ensure that it aligns with your financial goals and needs.
Do I need to disclose all of my life insurance policies to each insurance company when applying for coverage?
Yes, it’s important to disclose all of your existing life insurance policies when applying for new coverage, even if they are with different insurance companies. This is because insurance companies typically require applicants to disclose all of their existing policies as part of the underwriting process. Failing to disclose an existing policy could result in your new policy being canceled or your beneficiaries not receiving the full payout in the event of your death. Additionally, providing inaccurate or incomplete information on your application can be considered insurance fraud and could result in legal or financial consequences. It’s always best to be transparent and upfront with all insurance companies when applying for coverage.
Will owning multiple life insurance policies affect my ability to get approved for coverage?
Owning multiple life insurance policies typically won’t affect your ability to get approved for coverage. In fact, having multiple policies may even be seen as a positive factor by insurance companies, as it can demonstrate that you take your financial planning and protection seriously. However, it’s important to note that the amount of coverage you have across all of your policies will be taken into consideration when you apply for new coverage. Insurance companies will typically limit the amount of coverage they will issue to an individual based on their overall insurability and financial risk. If you already have a high level of coverage across multiple policies, you may find it more difficult to get approved for additional coverage or may need to pay higher premiums to offset the additional risk. Ultimately, the impact of owning multiple life insurance policies on your ability to get approved for coverage will depend on a variety of factors, including your overall health, age, income, and financial history.
How do I know if I need multiple life insurance policies?
Determining if you need multiple life insurance policies depends on your unique situation and financial goals. Here are some factors to consider:
- Dependents: Do you have dependents who rely on your income? If you have young children, you may need more coverage than if you have adult children who are financially independent.
- Debt: Do you have significant debt, such as a mortgage or student loans? If so, you may need additional coverage to ensure that your loved ones can pay off your debts in the event of your unexpected death.
- Business ownership: Do you own a business with a partner? If so, you may want to consider purchasing a separate policy to fund a buy-sell agreement in case one partner dies.
- Estate planning: Do you have significant assets that will be subject to estate taxes? If so, a life insurance policy can provide funds to pay those taxes and ensure that your heirs receive your assets.
- Budget: How much can you afford to spend on life insurance premiums? Purchasing multiple policies may be more expensive than purchasing one larger policy, so consider your budget before making a decision.
Ultimately, the decision to purchase multiple life insurance policies should be based on your individual circumstances and financial goals. It may be helpful to consult with a financial advisor or insurance agent to determine the best course of action for your situation.