One of the most common questions that people have about life insurance is whether they can have multiple life insurance policies?
To answer the question simply, yes, it is possible to own more than one life insurance policy. Additionally, you will often be able to extend your current life insurance coverage in the future. This is great news for people who are only able to afford a small amount of insurance in the status quo but plan to expand their coverage once they can afford more.
Generally speaking, a life insurance policy is a bundle of “rights” to future cash flows that will be paid to your beneficiaries. Though the term “life insurance” can be used to describe a wide range of financial assets, life insurance is typically purchased one policy at a time.
The size of a policy does not impact the number of policies that you own. Some life insurance policies will provide only $5,000 in coverage while others may provide upwards of $5 million. To have more than one life insurance policy, you will need to have either purchased coverage from multiple providers or purchased an additional policy from your original provider (which is different from simply increasing coverage).
If your life insurance needs or financial status change later in life, then you may want to consider adding coverage to an already existing policy. If this is the case, then many life insurance companies will willingly let you expand your coverage on current policy in exchange for an increase in your monthly premiums.
There are many different ways that a policy can be “expanded.” The simplest way is through an increase in your death benefits (for example, increasing death benefits from $50,000 to $100,000). Depending on your life insurance provider, you may need to take a medical exam before these expansions are approved. Other common ways of increasing coverage include adding riders to a pre-existing policy or creating “hybrid” life insurance coverage.
Each of these methods mentioned above are different than adding a new life insurance policy. Usually, having a second life insurance policy means that you are using multiple different life insurance providers, though this is not always the case. Some individuals prefer to have life insurance from multiple outlets because they believe it makes their financial holdings more diverse. However, this may also make things more complicated than is necessary.
No firm rules are preventing you from getting life insurance coverage from multiple providers. In fact, according to lawyers familiar with the life insurance industry, doing so is perfectly legal, though it may not always make sense.
Usually, the most common reason that someone will own multiple life insurance policies is that they are provided with a minimal amount of coverage by their employer and hope to find some additional coverage elsewhere. Though you may be able to expand the coverage you receive from your employer by giving up part of your salary, many people prefer to have their own life insurance policy that is independent of their current employment situation.
As is the case with all major financial decisions, purchasing multiple life insurance policies is something that has several pros and cons associated with it. The primary benefits of purchasing multiple life insurance policies are:
The primary issue with owning multiple life insurance policies include:
Usually, the cost of $1 more in coverage decreases as the size of your policy increases. This means that two $250,000 policies will likely cost more than an otherwise identical $500,000 policy.
Owning more than one life insurance policy is something that is perfectly legal. Though the benefits of purchasing multiple policies are less than simply expanding your preexisting coverage, owning multiple policies may make sense in certain situations.
If you need more information on how to get a cheap life insurance policy online, contact our specialized agents at LifeQuote. We are happy to answer your queries and guide you, so you can make the right decision.