When it comes to life insurance, we all know how important it is to be covered. And there are many different options for the kind of life insurance you can have, but is one policy enough? If a person feels they need further coverage, can they get more than one insurance policy? The short answer is yes, but you have to be aware of how that works.
Laddering term life insurance policies
One strategy is to have multiple term policies that expire at different times – for example, you can have one for 10 years, one for 20, and one for 25. This way, it serves your beneficiaries' needs as they grow. In 25 years, only one policy will apply but the thinking is your beneficiaries’ financial needs would not be as high as they would be in the first decade.
Adding a new comprehensive policy
You may have an insurance policy from when you were younger that has a competitive rate, but it may not be enough coverage. Rather than giving that up, you can add a new policy that reflects your greater need for coverage. This can have a different term, a different beneficiary, and reflect a new financial reality.
Reasons for multiple life insurance policies
Life changes and so do our financial obligations – for example, a person may get divorced and remarried. They may still want to have life insurance for their former spouse and children as beneficiaries in case they were no longer here. If they died early, child support payment and spousal support would no longer be covered. But in their new relationship, they may want to take out a policy on themselves so that the new individual is protected too.
And in another scenario, you may have grandchildren you want to leave something to, who weren’t in the picture decades ago when you first took out an insurance policy.
Another reason you may want to purchase a secondary life insurance policy is to supplement the coverage from your work benefits. Group life insurance is typically capped out at a lower limit, so you may want to increase your financial protection. And what if you lose your job? Your personal life insurance policy can step in as a backup.
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Alternatives to buying multiple life insurance policies
If buying another life insurance policy is not for you, you can choose to protect your beneficiaries in other ways.
One option is to add a rider to your existing comprehensive plan. This is particularly important in the case of accidental death. It’s an optional feature that can address your unique insurance needs. In most cases, an insurance rider will mean additional premiums, but some policies can include it at no cost.
You can also increase the coverage on your current policy to reflect your growing needs. This is referred to as added guaranteed insurability – you typically won't need to complete another medical exam.
Lastly, another option is to convert your term policy into a whole life policy. Your premiums will be higher, but this guarantees you have coverage for life.
Is it good to have multiple life insurance policies?
There are pros and cons to having multiple life insurance policies. The pros are you have more comprehensive coverage and you can rest easy knowing your beneficiaries are covered. But the cons include higher premiums and in some cases, multiple premiums. You should take a look at your own personal finances to make sure having multiple policies is something you need and also something you can afford.
The bottom line
If your financial responsibilities have changed and your current policy no longer serves all your needs, speak to a qualified insurance professional about all your options. You don’t need to stay with the same provider – you can get a policy from a new life insurance company, and the payouts will not change as long as all the agreement terms are met.