Leveraging Your Coverage: Can You Have Multiple Life Insurance Policies?
Life insurance policies are usually flexible enough to accommodate different needs, but there are some exceptions. Whether you’re part of a group plan or just have particularly rigid insurance terms, sometimes buying multiple life insurance policies is the only way to get the coverage you want.
In this guide, we’ll go through the information you need to know about having multiple policies. This includes the basics of having several life policies, the process of applying, its benefits, and possible alternatives to having more than one insurance plan.
The Basics: Having More Than One Life Insurance Policy
Owning several insurance plans can be tricky. This section describes all the basics that you need to know before applying for another plan.
Can I Have Multiple Life Insurance Policies?
No rules or laws prevent you from having more than one life insurance policy. In fact, there are a few situations where this may be the best option to meet your coverage needs.
For example, if there’s been an addition to your family – or if you need to leave behind more life insurance money – a second policy could be an acceptable solution.
Why Would I Want More Than One Policy?
Generally speaking, policyholders apply for multiple policies when their existing setup isn’t enough to cover their dependents or an additional beneficiary. Here are a few critical situations when having various life insurance policies makes sense:
You have a company-issued life policy: If you opt into a group policy from your employer, you will get the same death benefit as all other employees regardless of your specific circumstances and needs. This means that the policy may not be enough to cover your family’s expenses should you pass away.
Your term policy is about to expire: It’s useful to get multiple policies if your term life insurance is nearing the end of its life. Not all term policies can be converted into a permanent life insurance policy, so some users may consider taking out a new plan for continued coverage.
Your whole life policy doesn’t cut it: Some people take out whole life insurance when they’re young. However, as they age, their financial obligations increase – and so do their coverage needs. With mortgages, children, and other loved ones that rely on them financially, a small life policy may just not be enough anymore.
Applying For Multiple Life Insurance Policies
Applying for a second term life or whole life insurance policy is the same as requesting any other policy. That’s because life insurance companies aren’t concerned with the number of policies you own. Instead, they usually look closely at the total amount of coverage or cash value you’ll have after the second policy is approved. You’ll have to justify the financial need for additional coverage each time you buy life insurance.
The relatively simple process can become quite complicated if you decide to apply for multiple whole life or term life plans simultaneously. This is especially true if you decide to apply for products at different life insurance companies.
The process usually starts the same way. You’ll answer life insurance questions about your hobbies, health issues, family history, and other relevant information. Approval, however, is trickier – especially when you have multiple active applications with different providers.
Each life insurance company is trying to make sure they don’t insure you beyond your insurability limits. When you apply for multiple policies, there is a possibility your application will be denied outright. That’s because it may look like you’re trying to get more coverage than your situation calls for.
The Benefits Of Having Multiple Life Insurance Policies
Managing more than one insurance product can be tricky, but the benefits can greatly outweigh the costs. This section describes how having several insurance plans can benefit you and your dependents.
Additional Life Insurance Coverage
Life insurance products are meant to act as a financial safety net for you and your beneficiaries. This is achieved through the death benefit, cash value account, or a combination of the two.
Your existing life insurance policies may sometimes fall short as you go through significant life changes. If you buy a house, get a mortgage, get married, have children, or start a business, it makes sense to increase your coverage.
However, trying to expand an existing policy’s coverage can be complicated and costly. That’s why many people take out more than one policy – to cover every additional beneficiary and secure their assets without the fuss of renegotiating terms with your insurance company.
To Complement Your Financial Plan
There are many ways to make term life, whole life, or universal life plans work in your long-term financial strategy. The most common plan involving multiple policies is called the ladder strategy, which involves taking out several term life policies for affordable long-term coverage.
To properly execute this strategy, a policy owner would have to apply for three-term life products covering 10, 20, and 30 years each. Given that all three policies would be active simultaneously, you would have the highest total amount of coverage during the first 10 years. This can help you cover the costs of childcare and a mortgage if you pass away.
As each insurance policy expires and your children become financially independent, you’ll pay fewer premiums over time – matching your dwindling financial obligations. So instead of paying expensive premiums for the rest of your life for coverage that you don’t need anymore, you pay less over time and get exactly the right amount of coverage.
However, if you want to explore the ladder strategy, you should know that managing it on your own can be complicated. We recommend working with financial experts who can help you make the most out of it.
Alternatives To Multiple Life Insurance Policies
There are several viable alternatives to managing multiple plans simultaneously. This section describes how policy riders or increasing your coverage may be the better choices.
Insurance Policy Riders
Riders are an easy way to customize your insurance plan. Some riders can be added to your insurance plan for free, while others come with increased premium payments. Just keep in mind that riders usually provide a smaller death benefit compared to a standalone plan.
Riders are usually cheaper and less complicated than buying more insurance, plus you’ll typically have options for very specific situations. For example, after providing the necessary documentation and information, you can apply for a spousal or child rider. Your insurer will then adjust your death benefit to accommodate your new beneficiaries.
Increase Your Existing Coverage
Increasing your insurance plan’s existing coverage can be quite complicated, especially after the first 12 months of the plan being active. Insurers usually require their clients to demonstrate the financial necessity of increased coverage. On top of this, clients will have to go through the underwriting process again and pay increased premiums.
If you want more coverage for a lower overall cost, having multiple life policies might be right for you. There’s no limit to how many plans you can legally have, but managing each insurance product can become complicated.
That’s why you need professional help. For more information on multiple insurance plans, contact us at Wesley Insurance, LLC! We can help you compare life insurance quotes and figure out if having multiple plans is the best solution for you.