Can You Have Multiple Life Insurance Policies?
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Getting a life insurance policy is one of the best gifts you can give to your family in your absence. It comes with several advantages, which are relished later by your loved ones. And there is no other way to die peacefully, knowing that the people you have left behind won’t face any financial tragedies.
When having a single life insurance plan can do great things. Imagine how multiple policies can brighten your loved ones’ lives.
So, can you have multiple life insurance policies?
Well, yes, you can have, and to tell you the truth, most of the Americans are now getting dual or a joint life insurance plan.
Life Insurance – Definition and Types
Despite life insurance is a well-known term, it is great to understand it once again in the simplest way. A life insurance plan is a legal contract between an insurance firm and an individual.
In life insurance, the insured (who buys the plan) pays annual premiums to the insurance companies.
In return, the insurance providers offer a death benefit (a fixed amount given after the death of the insured person) to the beneficiaries of the insured after his or her death.
Nevertheless, life insurance is also limited to a certain period (10 years or 20 years), where the insured receives the amount after the completion of the duration even if he or she is still alive. This insurance type is called the ‘Term Life Insurance’.
Similarly, there are other types including:
- Universal life insurance
- Whole life insurance
- Variable universal life insurance
- Guaranteed issue life insurance
- Simplified issue life insurance
Each life insurance category has its own terms and conditions, as well as, benefits. And this is why having multiple policies means high life security.
Buying Multiple Life Insurance – What Are the Possibilities?
You can buy more than one life insurance plan as far as the premiums are affordable to you, and if you don’t cross the insurability limit. So, what is the insurability limit?
When you think to get various life insurance, the insurance companies look for financial justifications because the main purpose of life insurance is not to increase your wealth but to support you or your family in the bad times.
And the best way to justify the finances is to look for the insurability limit. It’s a limit of a total insurance amount versus the amount you have already obtained through buying different policies.
For instance, your insurability limit is $2 million and you have already taken the policies worth $1.5 million. Now the insurance companies will not issue a policy of more than $0.5 million ($500,000) due to the limit. But anything below the range will be acceptable by the insurance providers.
So when you are buying multiple insurance policies, you are taking the laddering strategy that can be advantageous when it comes to saving your money for the future.
But how? Let’s have a look at this example.
You have three policies and you live with your spouse and have two children who are young at the moment. So at this time, your expenses are few and you have strong control over your budget. But after twenty years, your kids will grow and the overall expenses will increase.
So, with the help of a laddering strategy, you will be able to handle all the expenses. With one insurance policy with a maturity period of 20 years, you can bear all the expenditures of your children and spouse and with another insurance plan, you can pay for a mortgage, whereas, the third policy can be used as financial security in case you die within the period.
Is It Legal To Have Multiple Life Insurance?
No law can stop you from buying more than one insurance policy. So it is completely legal to purchase and keep multiple life insurance policies. However, there are two important conditions:
- Disclosing current policies
- Providing financial details
i. Disclosing Current Policies
You might have heard people complaining about not being qualified for multiple policies. But have you asked why? It is because they don’t reveal their previous life insurance plans to insurance companies.
Sooner or later, the insurance providers find the truth and they reject the application for misrepresentation. So never make the mistake of hiding your insurance plans because even if you will be lucky enough to qualify for an insurance plan, there will be a risk of losing the death benefit as soon as the insurers will find out.
There have been several cases where the beneficiaries have undergone disappointments because the insured has overshadowed the truth. So disclosing your existing policies to the insurance firms will allow them to help you pick the right policy.
ii. Providing Medical and Financial Details
When a life insurance firm receives your application for a new policy, it begins with the risk assessment process. This procedure is also called the ‘underwriting’ in which your health is assessed along with your financial condition.
So when it comes to financial underwriting, insurability is reviewed by assessing your existing life coverage and income. On providing the details, your insurance provider calculates the ‘Human Life Value’. In other words, this is the stage where the insurer evaluates your insurability limit and makes a policy accordingly.
Remember, the above-mentioned points are very essential if you wish to have plural policies. Failure to provide all the required information (intentionally or unintentionally) can result in a severe loss and the consequences can be dreadful as you have been involved in an illegal practice.
Pros of Multiple Life Insurance Policies
Buying multiple policies can help you enjoy numerous benefits, such as:
1. Fewer Rejections
It is true that in life insurance, the insurer has the right to renounce your policy claim, and the beneficiaries suffer the pain.
However, the first and foremost advantage of applying for multiple life insurance programs is the surety of getting approved immediately. Well, the logic is understandable because when you go for multiple policies, you provide all the necessary information to the insurer.
The company then evaluates and checks all the details. And once your documents are passed, the company does not reject the claim.
On the other hand, if any company does reject giving you or your beneficiaries the benefit, you always have other doors open for you. So in that way, having many life insurance policies assures peace of mind, as you know your loved ones will get the benefit, if not from one company, then from another.
2. More Claims
Imagine yourself on the deathbed without worrying about how your family will live their lives. You will know that your dual life insurance programs will take care of your loved ones’ financial needs after you are gone. So, multiple policies mean multiple claims.
So when you go for more life insurance programs, you allow your family members to claim more amounts at the end of the day. And in case you survive in the entire term, you get multiple benefits. So as you have been paying your premiums, therefore, after receiving the benefits from different insurance firms, you can use the amounts for several purposes.
3. Different Maturity
Many insurers lose their lives in the hope of receiving the coverage during their lifespan. However, the long durations won’t allow them to savor the outcomes from their insurance program.
This mostly happens to those who rely on a single insurance policy. They choose a longer maturity period (20 years) to get a maximum benefit, but they end up waiting until death arrives. But with multiple policies, you are likely to see the results of your premiums while you are still alive.
For instance, you have four life insurance policies. Two with a maturity of 20 years and the remaining with a maturity period of 10 years, so there are high chances that you will receive the benefits of the 10 years insurance policies before you will say the final goodbye.
4. Maximum Financial Protection
When it comes to financial protection, it is just not about creating a survival mode for your family after your demise. But to give them an exceptional lifestyle, where your spouse can live happily, and your children can get all the perks of life, such as great education and a respectful reputation in society.
All of this seems impossible through a single life insurance policy. Nevertheless, having more than one life insurance program can help your family live their dreams.
And if you are lucky enough to get the coverage in your life, the money you will get from multiple plans will be plenty enough to have a beautiful life after getting retired from your job.
5. Additional Beneficiaries
Lastly, a single plan limits your beneficiary list. So for example, you have three kids and spouse, you will need to drop someone from the list. This can break the hearts of the family members and creates emotional barriers.
But when you pick multiple life insurance plans, you can add a different name to every policy. Suppose, for policy ‘A’ your spouse can be the beneficiary, whereas, for policy ‘B’ and ‘C’, your younger son and elder daughter can be the beneficiaries.
This brings peace to your mind, as you know that everyone will have their share in your absence.
Cons of Multiple Life Insurance Policies
As from a rose comes a thorn, so there are a few disadvantages of keeping multiple policies because they are:
Paying for multiple plans can be expensive, especially when you have a limited budget. So if you are thinking to go for numerous policies, make sure you will be able to bear the premium expenses.
2. Hard to Handle
There’s a lot of paperwork you have to witness each time you will apply for a new policy. This can be stressful, as you have to go through the same procedures over and over again.
Moreover, when you buy multiple life insurance policies, you are required to check the transactions and records every now and then because there are chances of missing a payment.
After all, premiums are liabilities, and there is no way you can skip the dues, just like you cannot ignore paying the rent or mortgage. Therefore, if you want multiple policies, then you have to make a proper budget.
The best way to do it is to discuss your plans with your family members because their support is always needed. And only buy several life insurances if you think you can handle the pressure.
Can You Buy Multiple Life Insurance from Different Companies?
The answer is yes. You can choose the same insurance company or a different one for having multiple life insurance plans.
For instance, you could have universal life insurance from the company ‘Y’ and a term life insurance policy from the company ‘Z’. There are no restrictions at all.
The only thing that matters is your insurability limit, as each company you would select will check your limit before approving your application.
Life insurance policy is an essential part of life that provides tranquility in every situation. And having more than a single life insurance plan can be fruitful for you, as well as, your family members.
But, before you go for it, ask yourself ‘can you pay for multiple life insurance policies?’ Because more policies add more responsibilities on your shoulders, but the gains are always advantageous. Nevertheless, it is the best way to protect your family and stay memorable despite being gone forever.