It is reasonable to buy many life insurance policies rather than going for one comprehensive whole life policy. When you buy one heavy policy to act as an umbrella for all expenses, it can become a hassle sometimes.
If you buy a $1,000,000 coverage whole life, it can seem like the best idea ever. But if you look at this decision closely, you’d understand that you could have saved so much money by buying separate small policies for individual needs.
- Can a person have more than one life insurance policy?
- What might be the reasons for having more than one life insurance policy?
- What are the limit restrictions for multiple life insurance total coverage?
- Can I have more than one life insurance policy? What do I need to consider when buying many policies?
Can a person have more than one life insurance policy?
The best way to go about life insurance shopping is to look for professional counsel through an independent agent licensed by NAPFA. Try to get an accurate picture of your insurance needs. Buying one big policy to cover the funerals, kid’s education expenses, medical costs, mortgage loans, credit card bills, and other loans seems reasonable.
But a much better substitute is to buy a separate cheaper term life policy for mortgage loan, small coverage burial insurance for funerals. Similarly, adding a rider of long-term care for old age medical bills on a whole life small coverage personal policy to fund the old age medical bills. The whole life small coverage can fund kid college expenses. It is a smarter way to spend less, and get the necessary coverage.
What might be the reasons for having more than one life insurance policy?
Supplementing the group life with an individual policy
If you’re insured by group life with your employer, it is a small coverage policy with $50,000 coverage usually. When you leave your job, you become uninsured. Buy an individual personal medium coverage whole life or term life in young age to cover your family.
Allotting separate policy for separate financial need
It is the right manner of using many policies together, by spending less on premiums.
- Like you can buy $25,000 coverage for funeral expenses.
- Health life insurance of $15,000 coverage.
- Decreasing Term Life for paying back the mortgage loan for coverage $20,000.
- For kid’s college expenses buy a term life for 30 years with coverage $100,000.
- For retirement planning or income replacement after your death buy whole life with $50,000 coverage. Total of all 5 policies is coverage of $210,000
This will save you from paying heavy premiums for 1 whole life for all the same expenses but coverage $1000,000.
For a term life ladder
It is a ladder of term life policies to cover your entire life with decreasing term policies for separate expenses. With marriage, job shifting, business start-up, and child education; the expenses are at their highest. You have to get policies who can help you pay for them.
But when you are older and children are married off, it’s just you and your spouse. Now your expenses are significantly less. Now you need only a burial insurance policy and a long-term care insurance policy.
To address changes in your financial obligations
A lot of factors keeps changing throughout your life like:
- Marriage
- Family startup
- Business startup
- Buying a house
- Child college
- House redecoration
- Number of dependents
- Mortgage, credit card, property, car loans
Buy a couple of policies suitable for different time phases, during your life.
To buy burial insurance for funeral
It is mandatory to finance your own funeral after death, for saving the loved ones from the expense at the time of sadness. It is a $10,000- $25,000 coverage burial insurance policy. It pays out in 24-48 hours after claim approval.
To add long-term old age care coverage
With your principle whole life or term life, always buy an additional long-term care coverage policy too. It is also available separately or as a rider or add-on. This pays for old age medical or hospice care in your last years, to you and your wife.
What are the limit restrictions for multiple life insurance total coverage?
These are fixed by the life insurance companies:
| Age limit | Coverage Limit |
| 18-40 year old | 35-45 times your annual income |
| 41-50 year old | 25-35 times your annual income |
| 51-60 year old | 10-20 times your annual income |
| 60 and above | 5-10 times your annual income |
Can I have more than one life insurance policy? What do I need to consider when buying many policies?
Full disclosure of all current life insurance policies’ total coverage
When shopping for more than one life insurance policies, remember the insurance firm will ask you for the present coverage that you have. You have to give full disclosure of all your life insurance policies and their total coverage.
Never under-report or lie, your data is verified by the MIB and reinsurers. If your lie gets detected you’re committing life insurance fraud. Second life insurance company might deny your application too.
Honest Income and asset declaration
When a policyholder goes for the next life insurance policy, or a policy worth more than $5,000,000 face value. Then his real estate and savings assets are checked. Complete process of checking the bank statements, income records, real estate net worth and any other source of income will be researched.
Stricter medical exam and underwriting
If you apply for multiple policies which give total coverage near to $5,000,000, then you undergo a stricter underwriting and medical exam. You also have to take the Electrocardiogram (EKG) test in that case.
Multiple policies with different insurers
Instead of buying many policies from one agency, you have to couple up many agencies. One agency has a limit to insure you by around $2,000,000 to $5,000,000. For buying more coverage, you choose multiple life insurance agencies.
The Bottomline
No matter what, the insurer confirms all your information and records. If you work as a contractor or freelancer; but apply for income replacement $5,00,000 policy. Your application might be denied due to exaggeration of income. Similarly, it is important to stay honest, if you hide assets and later the agency finds it out, they can deny your death benefit payout to your dependents after your death.
To lower the cost of all your life insurance policies, just make sure you avoid:
- High-risk habits.
- High-risk hobbies.
- Smoking.
- Extra alcohol usage.
- High-risk jobs.