Can You Have More than One Life Insurance Policy?
Life insurance is one of the most responsible things you can do for your family’s benefit. This ensures that your family’s financial health remains stable even after you are no longer there to provide for them. Before you buy yourself an insurance policy, however, it is important that you determine if it provides enough cover for your family’s needs.
At this point, you might wonder if it would be better value for money if you bought multiple policies with lower premiums, and whether that would even be legal. The good news is, it is perfectly legal to have more than one life insurance policy. However, you need to assess if you actually need them.
There are different types of life insurance policies, and you might want to purchase different ones for different purposes.
There is the Term Life Policy which is a very basic plan. The policy has a fixed lump sum paid to the beneficiary, in the event of your death. It has an expiration date, which is why it is called a ‘term’ policy. You will need to take out a new policy every time it expires and it gets more expensive as you grow older.
The Whole Life Policy, on the other hand, does not have any time limit. Additionally, it also ‘earns’ money for you by investing part of your premiums, and the premium is fixed for life. This way, not only do you ensure a payoff for your family in the case of your demise but your policy also grows in value. The downside to this is that you cannot be an active participant in the investment decisions.
This disadvantage is taken care of in the Variable Life Policy, where you have a say in where your money is being invested. It leads to a higher risk, but the returns are also greater in case of a good investment. However, you cannot control what the value of this policy would be in case of your sudden demise.
Universal Life Policy gives you a lot of freedom to choose, and you have more leeway in the premiums you choose to pay and the face value, but with no say in the investment decisions. The Universal variable, however, lets you be responsible for all your investment decisions at the risk of you losing out in case of bad choices made.
In addition to these, there are other kinds of life insurance policies that are designed for specific purposes. For example, death benefit, Accidental Death Benefit, and Final Expenses Benefit are all different types of life insurance policies that you may consider.
However, you need to be aware that your motives for having too many life insurance policies might be questioned by the insurance company. This is especially true if it means that the amount you want to be insured for is way above your income.
You also need to be aware that having multiple policies with smaller premium amounts could actually be less value for money. Generally, it is more cost-effective to pay a higher premium than it is to pay several smaller ones.
In short, you can have more than one policy if you want to divide them based on the benefits offered, but it is not advisable to do so if you are only doing it to lower your premiums.