Some life insurance policyholders or people looking to buy life insurance often ask if they can have multiple life insurance policies.
Indeed, you can. Having multiple policies for yourself has never been a crime, and your reasons for seeking more policies are always valid. Besides, some policies do not cover all your needs, so when this happens, you can decide to purchase more policies to protect what is lacking.
While this may be many people’s reality, some are comfortable with just one policy which may or may not serve for full coverage due to funds. But with anyone who belongs to the category of those looking for ways to have more than one life insurance policy, here’s what you need to know about purchasing multiple policies to your advantage.
Is there a limit to life insurance policies you can own?
Well, having more than just one insurance policy is doable, but a lot goes into consideration before your purchase. Also, all your policies may come from the same life insurance company or companies. You may figure out that your life insurance policy is not serving your additional needs because you purchase it while single and now have a family. You can talk to your insurance company to see how you can purchase more beneficial policies. If not, you may look at a new company and begin the process of a new purchase.
Having said that, your major limitation to buying more policies is your income. Your annual income will tell if you can handle additional policies at your age and with the kind of job you do. So, with this, your limit to the number of coverage you are entitled to is between 20 to 35 times your yearly income, and your age contributes majorly to this.
What to understand before going for an extra life insurance
Some insurance providers will demand to see your existing policy. They will investigate your information and ask the necessary questions to ensure you do not have a fraudulent claim. Moreover, some will require you to have a medical examination. Whatever they find out from their investigation will determine if they will indulge or decline your offer.
For some insurance companies, you will provide your assets and tax records and declare your net worth. Insurance providers find this information very valuable because some people do not have a fixed annual income, like contractors or freelancers who earn different amounts annually. If you are still not within your coverage limit and have the income to sustain, you may add additional policies.
Reasons for wanting more than one policy
The reasons people want to get different policies differ a lot, and here are some of them.
Using only employer-gifted policy
Employees who have been using only their employee benefits life insurance policy or the group term life insurance from the workplace may seek to purchase more coverage. Employers’ policies are always limited and will not cover other parts of your life. Sometimes, changing your workplace or getting fired means an end to your coverage. So, you may want to begin an additional policy process.
Family members are now in the picture.
A younger person may have purchased a policy that is not family-friendly, but now loved ones are in the picture, and you would like to leave some inheritance for them when you pass away. This would make a policyholder seek out more policies that have a means of leaving beneficiary benefits. An example of such a policy is the whole life insurance policy.
You own a business
Suppose you are self-employed with a small business and do not want to saddle anyone with the burdens of paying loans and costs in your business. In that case, you may purchase an additional policy that favors small business owners.
Cover overlooked angles
Some policies do not cover options like final rights. However, it is a critical angle you must cover and permit your loved ones some financial breather should you pass. Other neglected angles are not always in a standard policy, like long-term care or disability coverage. While you have a positive outlook toward the future, it may seem wise enough to cover these angles. You should talk to your insurance provider about this and find a way forward.
Laddering your insurance
Building an insurance ladder is another reason people buy more than one policy. This method helps you to spread your policies under your coverage. You may decide to use a term life insurance coverage and get different policies to cover other needs for different years. Term life insurance is always cheaper and can allow you to pay affordable premiums on all your policies. Now, you have different payouts from each policy so long you keep them active and renew.
When financial obligation changes
Term life insurance is temporary life coverage and will only be suitable at a particular life stage. More responsibilities may require policies you can get from permanent life coverage. For example, the cash value you build up in permanent life policies is not present in term life insurance policies. Whatever your plan for your future will serve as a determining factor in the direction your life insurance should take. More so, your income change, whether increase or decrease, will help you plan the coverage in the future.
There are advantages to having multiple policies under your coverage; it gives you more peace of mind and more financial options. The only downside is for low-income people who can not afford to cover as many areas of their lives as they need to.
If you can, and you are not up to your limits on coverage, have a chat with your insurance provider or a new insurance company for ways to add more suitable and necessary policies to your life insurance coverage.