Having two life insurance policies sounds like a good idea on the face of it. But along with protection, are there any costly pitfalls? What if the reality is a bit more complicated than it seems?
If these are the questions coming to your mind, I got your back!
This article will help you pick the right policy. Let’s examine the life insurance policies you can have and whether having two life insurance policies is a good idea in the first place.
Is it legal?
Having two life insurance policies for one person is possible and legal. Many people get life insurance coverage through their employer and their term life policy or permanent life insurance policy.
There may even be some benefits to having two insurance policies. Still, it helps to do a cost-benefit analysis before coming to the final decision, which we will cover in this article.
Policies for couples
Having two life insurance policies is a crucial decision to make, especially if you are a couple. You can either buy a joint policy to cover both lives or buy one policy for each of you.
If you are looking for a better value, two single-life policies may be a better choice than a joint-life one which payout on either the first partner’s death or the second.
What if you’re single?
Can you have two life insurance policies if you are single? Yes, definitely. It’s possible. But does that make having two life insurance policies advisable? Not really. Your life insurance premiums depend on what you disclose about your health history while taking out a policy. But while taking out an additional policy, there is no guarantee that you will pay the same rate because you will have aged than when you took out the first one.
What customers do instead is that they adapt to their existing policies as per their changing needs. For instance, you can increase your life insurance cover. Other changes that you can make include increasing or decreasing the length of the policy term. You can also switch from joint to single policy or even change your premium payments from monthly to yearly.
Where is the limit?
There is no legal limit to having multiple life insurance policies, and you can have as many as you wish. But never forget that it is possible to adapt to your changing conditions while being on the existing policy. Having two life insurance policies is undoubtedly legal. However, there are other better options if you need to review your coverage.
Reasons behind having multiple life insurance policies
People opt for two policies to provide a safety net for those who count on their financial support. But this is not the only purpose for having two life insurance policies for one person. Following are the other functions and situations in which having two life insurance policies make sense:
Group life insurance is not enough!
You might consider having individual life insurance in addition to the supplement life insurance your employer is offering you. Well, let’s face it, you might change jobs at some point in your life!
What if you leave your job? How would you be able to keep your group life insurance in this case? That’s when individual life insurance steps in to provide coverage.
Meeting your financial goals
If you didn’t already know, there are two types of life insurance policies:
- Term life insurance
- Permanent life insurance
And they both serve different purposes. The former is for primary income replacement, while the permanent life insurance can help you with retirement planning later in your life.
Life insurance laddering
Life insurance laddering is the strategy of build coverage by having two or more life insurance policies instead of one long-term one. These policies together create form a significant enough death benefit.
You want to carry more coverage while expenses are high when you are young. Later in life, your children have most likely moved out, and you have paid off your mortgage.
Adapting to changing financial obligations
Financial situations never stay the same. You might consider having two life insurance policies while having another child later in life while starting a business or paying off the mortgage. It is apparently more advantageous to have two life insurance policies for one person than replacing their current policy altogether.
Covering the cost of long-term care
As you get older, you are at an increased risk of getting sick. It is an uncomfortable topic to talk about, but end-of-life care is worth planning at any point in your life. Two life insurance policies may help you prepare for the cost of long-term care.
Conclusion
One word answer to the question, can I have two life insurance policies, is yes, legally.
But you can adopt a flexible approach meaning it is not strictly necessary. Your financial situation may often change throughout your life, and you might require a different insurance plan. It is also imperative to consider the various terms and conditions that could apply while setting up a new policy.