Is It Possible to Have Multiple Life Insurance Policies?
Many of us reach a point in life where it's smart to consider investing in a life insurance policy. Put simply, if you have family members or anyone else in your life who relies on you for financial stability, a life insurance policy may ensure that your dependents have something to fall back on if anything happens to you.
For some families, a single life insurance policy is sufficient to provide coverage for your dependents if you were no longer around to provide financial support. However, there are other circumstances in which an additional life insurance plan can further benefit your dependents’ financial security.
The good news is that it's possible to have more than one life insurance policy at the same time. Purchasing an additional life insurance policy can increase your coverage to meet your current financial needs that may not be met with your existing policy.
Why Should You Consider Multiple Life Insurance Policies?
Before making a decision on whether taking out more than one life insurance policy is the right choice for you, you need to understand why some people go down this route. A good first step is to calculate your own life insurance needs (essentially, how much money would be needed to support your financial dependents and cover any funeral costs or debts if you passed away), and to evaluate how far your existing policy will go towards covering those needs. Discuss your needs with a professional and make sure you are fully aware of all your options before making a decision on the right path forward for you.
Supplement Group Life Insurance
Many people are part of a Group Life Insurance plan through their benefits package provided by an employer. In some cases, Group Life Insurance benefits offer employees a limited amount of life insurance coverage at a reduced or no cost. Generally, the fixed amount of coverage these policies offer do not adequately cover each employee's personal circumstances and can function more as a perk of employment rather than an all-in, comprehensive life insurance plan. In this case, some people may consider purchasing additional life insurance either on their own or through the supplemental life insurance benefit offered through their employer.
If your life insurance needs are not adequately covered by your Group Life Insurance policy, supplemental life insurance can increase your coverage and provide insurance for a range of specific circumstances. Whereas the employer usually pays the premiums for Group Life Insurance, the policyholder typically pays the premium for supplemental life insurance.
Anyone considering supplemental life insurance should be aware that policy premiums tend to be higher than for individual life insurance premiums. Supplemental life insurance can be a good option for people who may have difficulty being approved for an individual plan, but younger people who are in good health may be able to get a better deal by going through an outside provider.
Increase Life Insurance Coverage Through a New Policy
Existing life insurance policyholders may find that their current coverage is not enough to match their changing needs. It's good practice to consider how well your coverage meets your needs at least on an annual basis, but any major life change should prompt an immediate review of your existing life insurance coverage.
This is by no means an exhaustive list, but people who are taking on any of the following responsibilities may want to consider increasing their life insurance coverage:
- Having a baby. Each additional child is another financial dependent, and your life insurance needs will accrue accordingly.
- Becoming financially responsible for an elderly, sick, or disabled relative.
- Taking on new assets and liabilities. For example, buying a second home and taking out another mortgage is a debt that you would want to be covered if anything happened to you.
A second life insurance policy can help to ensure that your dependents are covered and your debts will be paid in the event of your own death.
Alternatives to Purchasing Multiple Life Insurance Policies
So you've decided that your existing life insurance policy doesn't fully meet your current needs. What next? Before purchasing an additional policy, ensure you understand the options within your existing life insurance policy. You may be able to increase or extend your coverage without needing to purchase a new policy altogether.
Increasing Your Current Life Insurance Coverage
Increasing your existing coverage could mean extending the duration or term of your policy, or it could mean upping the value of the policy. However, before taking action, talk to a licensed Life Insurance Agent to determine if it makes sense to increase your coverage, supplement your existing coverage, or purchase a new policy altogether.
Consider Life Insurance Riders
Another option is to think about life insurance riders. Life insurance riders are designed to allow the insured person to pay an additional premium covering a specific individual need. Since life insurance riders are optional add-ons to an existing policy, the insured person may not need to go through underwriting as they would with a new policy.
Common types of life insurance rider include:
Exclusions may apply to life insurance riders, so be sure that you understand the terms and conditions before signing up.
Find the Right Solution for Your Needs
If you determine that your current life insurance policy doesn't provide adequate coverage, you certainly need to consider extending your life insurance coverage as a matter of urgency. However, buying multiple life insurance policies isn't the only option on the table, and it's not always the best option for your specific needs. Consult a licensed Life Insurance Agent to explore all your options in depth and make sure you understand the implications of each choice for your and your family before you make your decision.