You can have multiple life insurance policies as long as you qualify for each.
A life insurance beneficiary designation usually overrides a current spouse or a will.
You can sometimes avoid additional policies by adding to an existing one.

Often, when people realize the power of life insurance, they seek out multiple policies to cover different areas of their life. Should you? The answer depends on your situation and goals.

 

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Can you have more than one life insurance policy?

You can have multiple life insurance policies, as there’s no limit on how many policies someone can purchase. As long as you meet an insurance company’s evaluation criteria, you can buy a policy.

To get started, you'll first need to complete an application, a health form, and usually a medical exam. The insurance company will also scan the application for potential fraud; applying for multiple policies at the same time might raise a red flag. If you pass the medical exam, fraud scan, and financial qualifications, you can typically obtain the policy even if you have others already open.

Different types of insurance policies

Individuals shopping for life insurance can consider a term life policy, which lasts for a set time period, or whole life insurance, a type of permanent life insurance that never expires. A term policy is typically less expensive than a permanent life policy, while permanent life insurance can offer the benefit of cash savings as well.

Owning a term and permanent life insurance policy could be a good option for those who want the advantages of both.

Benefits of multiple life insurance policies

Multiple life insurance policies often make the most sense to:

  • Protect for different purposes.

     You might want an individual term life policy to help cover your family's living expenses if you pass away. (Permanent life insurance can offer that as well, and provide another tool for saving toward retirement or planning for your estate.)

  • Gain higher levels of coverage.

     Adding a baby to the family may trigger the need to increase your policy. Or maybe you start another line of business and take out loans to do so. The extra insurance can help ensure your company can pay the loans off, even if you pass away.

  • Supplement your workplace policy.

     Perhaps you have group life insurance through your job, but you need more coverage to help secure your family. An individual policy can supplement your workplace plan.

Should you have multiple policies?

Deciding to take out multiple policies comes down to personal preference. Some people like to “ladder” life insurance policies, which involves buying multiple term policies with different benefit amounts and lengths.

Multiple policies for couples

Here’s an example of laddering. A couple might buy a policy that covers 30 years to help the family pay off a mortgage should the breadwinner pass away. Meanwhile, they can add a different 20-year policy to provide income for a parent to stay home with the kids until they’re a certain age.

With laddering, each policy could expire as you pay down specific debts or your financial needs decrease. Some people find that several policies, each with a lower benefit, can be better overall than a larger, longer policy. That’s not always the case, though. Another potential downside: The ladder approach requires you to manage multiple policies at once.

Policies with multiple providers

Some people find that several policies, each with a lower benefit, can be better overall than a larger, longer policy. Or they discover that one provider doesn’t offer policies that meet all their current needs, so they split insurance coverage among multiple providers. All are common approaches to obtaining multiple policies.

There’s one potential downside to laddering and spreading policies between different providers: These approaches require you to manage multiple policies at once, making it more difficult for some to keep track of their money.

Alternatives to multiple policies

It’s often more expensive to get life insurance as you age, as health issues can affect the cost of a policy. That’s why, to cover those needs, some people prefer to buy one larger policy when they're younger. Also, sometimes you can raise the coverage limit on an existing policy. That may involve another medical exam and a premium increase, but it’s one way to avoid having (and managing) multiple policies.

Adding a rider to increase the coverage on an existing policy can also provide similar benefits without forcing you to get another policy. In some cases, a rider may also give you access to benefits while you’re still alive.

 

Because there are different types of term life policies, you can determine which might work best for you by understanding the difference between level and decreasing term policies.

 

Written by Deborah Abrams Kaplan

Deborah Abrams Kaplan covers personal finance and insurance for publications and brands. She previously investigated professional liability claims for an insurance company.

 

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