Can You Have Multiple Life Insurance Policies?

Why Would You Want Multiple Life Insurance Policies?

Having more than one life insurance policy can provide additional coverage for you and your loved ones. Consider purchasing multiple life insurance policies for the following reasons:

• You need more coverage than your group insurance provides. Most employer-provided group life insurance offers a basic level of protection that expires if you change jobs. If you plan on switching jobs soon, buying an additional policy could help prevent any gaps in coverage when you make the move. Or, you may want to purchase extra insurance if you need more coverage than your group policy offers.
• You want more protection due to a significant change. Your current policy may have perfectly met your needs when you first purchased it. But you may need more protection if you've started a business, had a baby or experienced another major life event. In that case, you may wish to "ladder" your coverage with a new insurance policy that accounts for your growing needs.
• You want to increase your coverage options. Life insurance prices and coverages vary by insurer, and many don't offer all the coverage options you want. For this reason, you may find that having multiple policies with smaller benefits can help you round out your coverage better than one larger policy.
• You want to take advantage of different types of insurance. You can also buy another policy to help you achieve a different financial goal. For instance, term life insurance is temporary coverage that typically costs less than other types of insurance, which can be beneficial when you have higher expenses, such as paying your mortgage and raising children. However, you may want to supplement your coverage with a permanent life insurance policy that offers cash value. This type of insurance carries a higher cost, especially as you age, so you may want to lock in a lower rate now.

Tip: While it's possible to have several life insurance policies, there's a cumulative insurability limit to the amount of coverage you can get, which varies by provider and your age.

How to Decide if You Need More Than One Policy

Adding another life insurance policy could help fill in the gaps in your current life insurance coverage. Since policies vary by insurer, your coverage might be great for certain needs but insufficient for others. A 2023 joint study by LIMRA and Life Happens revealed that 52% of adults with life insurance believed they didn't have sufficient coverage.

Having multiple policies can make sense if you want to address your changing needs. For example, insurance experts often advise carrying more coverage when you have dependents and significant debts, like a mortgage. In this scenario, you might consider buying a large 10-year policy along with smaller 20- and 30-year policies for when your needs taper off. In many cases, this approach to life insurance laddering could save you money in premiums in the long run compared to buying one comprehensive 30-year policy that might be excessive by the end of its term.

Of course, there are many instances when one insurance policy is sufficient. If you're single with no dependents, a well-constructed policy could be enough for your final expenses and debts. Similarly, many group insurance policies offer coverage for spouses and the option to add coverage as your needs change. In that case, your group insurance policy may be sufficient enough to cover your financial obligations and future needs.

Pros and Cons of Buying More Than One Life Insurance Policy

Consider these benefits and downsides of having multiple insurance policies.

How to Manage Multiple Life Insurance Policies

Once you have multiple life insurance policies, it's important to keep track of them so the details don't get forgotten. Here are some tips to manage multiple life insurance policies:

• Create a list with all your policies. It could be helpful to keep a comprehensive list of your policies that includes key details such as each policy's number, the insurer's name, contact information and the designated beneficiaries.
• Designate beneficiaries. Having multiple policies means you could have the same or different beneficiaries with each policy. In either case, you and your beneficiaries must clearly understand the policy they are associated with.
• Inform beneficiaries. Simply designating a beneficiary isn't enough to ensure they know how to access your policy. Make sure you relay pertinent information to each beneficiary and explain how they can obtain the death benefit.

Maintain Good Credit When Purchasing Life Insurance

Whether you carry more than one life insurance policy or increase coverage on your current policy, be sure to keep an eye on your credit. Some insurance companies use a credit-based insurance score to help set rates, so you could save on premiums by maintaining good credit. Start by getting your credit report and credit scores for free from Experian. Once you understand where your credit stands, you can take the appropriate steps to improve your credit if necessary.