Can a person have two life insurance policies?

It’s important to have life insurance to protect those who depend on you. But life insurance isn’t a one-size-fits-all proposition. There are different kinds of policies and a single policy may not meet all of your needs.

You can have more than one life insurance policy, and there are times when it is smart to do so. Here’s what you need to know about having one or more life insurance policies.

Keep reading to find out more about life insurance policies and make sure to use our free comparison tool above!

Reasons to Have More Than One Policy

Life insurance has a number of uses, and there are different kinds of policies that are suited for different purposes. For example, when your children are small and you have a mortgage, you may want term life insurance.

Term insurance lets you get a lot of coverage at a reasonable price, for a certain period of time. You could get a $2 million term policy for 30 years that would pay for your children’s upbringing and college and pay off your mortgage in the event of your premature death.

Once your children are grown and your house is paid off, you might not need the coverage any longer, so you could cancel the policy or just let it expire after the 30-year term is up.

Permanent insurance covers you for the rest of your life. It’s more expensive than term, but some policies accrue cash value which you can withdraw, borrow against, use to pay the premiums, or use to increase the death benefit.

Some people use permanent life insurance to pay for the estate taxes they estimate will be due when they die, so that their beneficiaries can inherit their entire estate.

Others use it so that they can be sure their heirs will receive an inheritance, even if they spend down the rest of their assets while they are alive.

Some life insurance policies have riders, or optional benefits, that make them attractive in certain situations. For example, you may be able to get a long-term care insurance rider on your life insurance policy, which will pay for nursing home care if you need it.

If you don’t need to go to a nursing home, the policy will pay a death benefit to your heirs when you die. Many people find this preferable to a stand along long-term care insurance policy, which may never pay benefits if you don’t need nursing home care.

You may want to spread the risk over multiple companies. A life insurance policy is only as good as the insurance company that issues it.

If you are concerned about a single life insurance company’s ability to pay your death claim when it arises, you may feel more comfortable having multiple policies with different companies.

Many people have a life insurance policy through their job. In this case, the face value of the policy may be a multiple of your salary.

While this is certainly a nice benefit, it is unlikely that it would provide all of the protection that your family would need. However, you should factor it in when you are making a determination as to how much insurance you need.

Reasons to Have Just One Policy

You may want to purchase a single life insurance policy because your premium may be lower. Like most things that you buy, the more units your purchase, the lower your cost per unit.

This is known as economy of scale. It’s less expensive for a life insurance company to collect the information needed to issue a policy, determine the premium by underwriting, bill the policy owner and ultimately pay the death benefit for one person than it is to do all of these things for many people.

Put another way, the administrative costs to the insurance company are the same, whether your policy is for $100,000 or $500,000.

If you have five $100,000 policies, you’ll probably pay more in total premiums than you would if you had a single $500,000 policy. In addition, most policies have an annual policy fee of $50 or so. This would be factored into the premium of each policy that you have.

Just as it is easier for an insurance company to manage one large policy as opposed to several smaller ones, it may also be easier for you and for your heirs.

You would only need to remember to pay one premium instead of several.

And when the time comes for your insurance policy to pay out, your heirs will only have to file one claim in order to get the money that they are entitled to.

There is a limit to how much life insurance you can have, regardless of the number of policies. A life insurance company will only insure you for an amount they consider to be reasonable, based on your age, your income and your assets.

The purpose of life insurance is to provide financial resources to those who depend on you in the event that you are not able to provide those resources yourself. If you have young children, a non-working spouse or a big mortgage, you will probably qualify for a significant amount of insurance.

Likewise, if you have a high net worth, you may qualify for a large amount of coverage. If you are elderly, with no dependents and few assets, an insurance company may decline your application for a large amount of coverage.

Life insurance may be something that most of us don’t want to think about, but it is worth considering and comparing the different options that you have.

Determining the right kind and amount of life insurance will give you the peace of mind that your family will be protected if something should happen to you.

Don’t forget to try our free comparison tool below and start comparing life insurance quotes today!

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