Can You Have Multiple Life Insurance Policies? (2024 Guide)

Yes, you can have more than one life insurance policy. There are several reasons a person might consider taking out multiple life insurance policies. For example, people might find that it’s cheaper to have two separate policies rather than pay for additional coverage on just one policy.

Multiple life insurance policies can also provide peace of mind. Ultimately, having multiple policies may give you greater control over how much coverage is provided in case something happens to you or a loved one.

Let’s say you are married with two children, and your family relies on your income. You also want to make sure that if anything happens to you, your family’s expenses will be covered.

In this situation, it’s common to have a 15-year term life insurance policy to cover education expenses, a 20-year term life insurance policy to cover your children’s marriage costs and a 30-year term life insurance policy — or a cash value life insurance policy — that provides for your spouse until you reach retirement age.

It’s also common to buy a permanent life insurance policy from one of the best whole life insurance companies that provides an additional death benefit and allows you to use the life insurance while you are still living.

Consider these four factors before taking out multiple life insurance policies.

• Coverage needs. Your life insurance needs may not all have the same duration. It can be more affordable to match different policies to the duration of each individual need.
• Financial goals. Sometimes your personal finances dictate the makeup of the policies you purchase. For example, if you have a large long-term need, but the premium is out of your budget, you may consider some coverage in cheaper, short-duration products and some coverage in longer-duration products.
• Existing policy terms. Sometimes it’s not worth scrapping your current life insurance policy if your needs change. Instead, you might take out a separate policy to address the new need.
• Underwriting. To avoid delays in the underwriting policy, make sure your medical exam company knows to send the results to each insurance company separately; otherwise, you might have to wait for the medical exam to get transferred from one life insurance company to the other. Alternatively, you can take advantage of no-exam life insurance.

There are two drawbacks to having multiple policies to consider.

• Policy fees. First, each policy comes with its own fees. While this fee is part of the premium you pay, it can be less expensive to have more coverage in one policy.
• Management time. Generally, it takes more time to manage two policies than one.

There are a variety of life needs and events where multiple insurance policies may be the best solution.

Major Life Events

Major life events, such as having a child, buying a home or starting a business, sometimes warrant having life insurance policies specific to each need. Multiple policies also allow you to customize your coverage by selecting different types of riders and policy features tailored to your individual needs and circumstances.

Estate Planning

Say you are remarried and have children from both marriages. Many estate planners set up separate trust structures for each family unit, and it’s sometimes easier to have life insurance policies suited to each family’s needs.

Long-Term Care (LTC) Planning

Life insurance companies commonly offer LTC riders, which allows you to use your death benefit to cover long-term care expenses while you’re still alive. You might consider taking out another life insurance policy so that you aren’t in a position to decide between covering your long-term care and making sure your beneficiaries receive a large-enough death benefit.

Term Planning

Term insurance laddering strategies are common and involve the use of multiple policies, each with different durations. There are a few companies that will allow you to buy multiple policies on one application, making the process easier to complete. Many people save on policy fees by keeping these policies with one life insurance company.

Individual vs. Employer-Paid Policies

Often, people will have personal life insurance policies in addition to a group life insurance offered at work. Having multiple policies ensures that even if you change jobs or lose employment, you’ll still have coverage. Also, you’ll likely be able to choose from more durations, riders and features that are not available in employer-paid plans.

The prospect of managing multiple life insurance policies may seem daunting, but coordinating your coverage can help avoid overinsuring your family and maintaining affordability. Here’s a look at how these two principles play a role when managing multiple life insurance policies.

Avoiding Overinsurance

It’s important to ensure that you don’t have overlapping or redundant coverages and that your coverage adequately meets your needs at any given time.

To avoid being overinsured, the amount of coverage from all of your policies combined should not exceed what is necessary for you or your family’s financial security. A financial advisor can assess whether your current levels of coverage are appropriate or if adjustments need to be made due to a change in circumstances, such as marriage, having children, a major purchase like buying a home or a new business venture.

Let’s say you have a $1 million, 30-year term life insurance policy. You planned for it to cover your $350,000 mortgage balance, $150,000 for education expenses for your children, $50,000 of final expense coverage and $450,000 for income replacement.

Let’s fast forward 15 years. Your kids are out of college, and your mortgage balance is now $175,000. Over 15 years, you’ve freed up about $325,000 of death benefit for additional planning.

Your financial advisor can help you evaluate if the impact of inflation on your income replacement and funeral expense needs justifies keeping coverage at the same level.

You also might want to put that extra coverage due to a life event that occurred during those 15 years, such as taking on a business loan. You might consider adding your business as a beneficiary instead of buying a new policy, ensuring that the loan is covered in the event of a premature death.

It is a very simple process to change or add beneficiaries to your policy. If you did not need the coverage for a business loan, but you have been considering adding a policy with a long term care benefit, you might convert the $325,000 death benefit to a new policy with a long-term care rider. Then, you’ll keep the remaining $675,000 of death benefit in your existing term insurance policy.

Having an experienced financial advisor can be very helpful when navigating the use and coordination of multiple policies in your overall financial plan.

Maintaining Affordability

It can be cost-effective to maintain different life insurance policies to address needs with different durations.

For example, you might have a $750,000 term life insurance policy and a $250,000 universal life insurance policy instead of one $1 million universal life insurance policy. Since permanent life insurance premiums only get more expensive as you age, you may want to lock in some coverage when you’re ready. To supplement the universal life insurance policy, you can take out a cheaper term life insurance to help you meet your current coverage needs.

In general, most individuals keep their insurance premiums costs between 1% and 3% of their income.

Term life insurance is a popular choice for those looking for coverage over a specific period, such as 10 or 20 years. This type of policy typically offers lower premiums, primarily because it does not build cash value like permanent life insurance. However, after the term expires, the insurance is canceled, which makes it suitable only for temporary needs such as providing income replacement while raising children or paying off debt within a certain amount of time.

Permanent life insurance, such as universal life insurance, whole life insurance, indexed universal life Insurance and variable life insurance, provides coverage over an entire lifetime (provided that premiums are current). Beneficiaries receive a full payout at death regardless of when it occurs during the policyholder’s lifetime. This type of policy is more expensive than term life insurance in part because it builds cash value as the premiums are paid. Cash value accounts allow individuals to access the cash for loans, withdrawals or other financial strategies, such as the infinite banking concept.

Permanent life insurance also offers riders to enhance coverage, such as an accelerated death benefit rider in case of terminal illness or a long-term care rider that allows the policyholder to access funds for extended medical care.

Combining term and permanent life insurance policies into a single strategy may provide the best of both worlds. Temporary coverage needs are met with affordable term policies while long-term needs, including retirement income, estate planning and legacy protection, are addressed by a permanent policy.

By understanding your needs, you can work with a financial advisor to assess the best strategy for your situation.

A thought-out strategy using multiple life insurance policies can be beneficial if circumstances and goals change due to marriage, children, home purchases, business ventures or other life events.

Focusing on policy coordination can help you maximize coverage for specific needs while keeping costs affordable.

Still, consult with a financial advisor before making adjustments to an existing policy. They can help evaluate inflation and other changes in financial needs over time and determine the best strategy for combining different types of life insurance products into a cohesive financial plan. When shopping for a new policy, we recommend getting at least three quotes from different companies to find the best coverage at an affordable price.

Scott Karstens is an accomplished insurance and financial services veteran, having worked inthe industry since 2001. He is currently the President of NFG Brokerage, but he is becoming best known as the Founder and CEO of both Broker Backoffice and his new direct-to-consumer insurance platform called Quote Bot, which offers user-friendly solutions for life insurance planning.

Ryan Lasker is a financial writer and editor with bylines in Morning Brew, The Motley Fool, and several more. As a certified public accountant, he leverages his technical expertise in personal finance and tax to fuel his passion for teaching financial literacy. When he’s not writing, editing or working in a spreadsheet, he’s biking the D.C. trails or reading.