You get life insurance to protect the people you love against the unpredictable. With this type of coverage in place, if the unthinkable happens and you pass away too early, your family isn’t left trying to pay the mortgage or fund your kids’ education without your income.
Basically, life insurance gives you a way to defend against the unexpected. But because life is, at its core, unpredictable, your life insurance needs might change through the years. That’s a big part of why it might make sense to have multiple life insurance policies.
Can you legally have multiple life insurance policies, though? And if so, do they need to be from the same company? Are there limits to the coverage you can buy?
You’ve come to the right place if you’ve ever wondered, “Can I have multiple life insurance policies?” Here’s what you need to know about layering coverage.
Are you allowed to have more than one life insurance policy?
Can you take out multiple life insurance policies? Yes.
This doesn’t just apply to couples who’ve looked at their partner and asked, “Can we have multiple life insurance policies between us?” The answer is yes there, too, but even individuals can have multiple life insurance policies. The death benefits of each can stack, and they won’t cancel each other out.
There is a caveat here, though. There are limits to the amount of life insurance coverage you can buy. Insurance companies don’t care about how many policies you have, but they are concerned with your overall policy benefits.
Each life insurance policy comes with a death benefit, or the amount your loved ones get from the policy when you pass away. This death benefit is supposed to support their transition to life without you, not give your family a means to get rich overnight. And that’s why there’s a cap to how much life insurance you can get.
The limit on multiple life insurance policies
To make sure your total death benefit is in line with your family’s actual financial needs, pretty much all life insurance companies are part of an organization called the Medical Information Bureau, or MIB. They all share information within that group, including specifics on how much life insurance you have with them.
Generally, the amount of coverage you can get roughly corresponds with your age and income level. If you’re under age 40, you can probably get life insurance death benefits totaling around 30 times your income. As you get older, insurance companies start to rein in that limit. By the time you hit 60, your death benefit limit might be closer to five times your current income.
Can you get multiple life insurance policies? Absolutely. But if you apply for policies with a total death benefit well exceeding the limits we just discussed, your applications will most likely be denied.
That’s part of the reason some people answer no to questions like, “Can I take out multiple life insurance policies?” If you apply for life insurance with the full benefit you want with two different companies at the same time, they might think you’re trying to get way more coverage than you need and deny you. Actually, though, they’re not denying the multiple policies, but the overall death benefit.
Can you have multiple term life insurance policies?
Again, yes. In fact, you could have two term policies, three term policies, or even four or more term policies. The insurance companies really don’t care how many policies you have or their type, they’re just tracking your overall death benefit to make sure it doesn’t get too high.
But can a person have multiple life insurance policies of different types? For sure. Assuming you’re staying below the applicable death benefit limit, you could pair a term life insurance policy and a whole one.
Can you have multiple life insurance policies with multiple insurance companies?
Whether you’ve got group life insurance through your employer or you have a policy you’ve had since infancy, you might be wondering if you’re stuck with the company underwriting your first life insurance policy. While you can stay with them (it’s an option to have two policies with the same company), you can also shop your options with other insurance providers. You can hold multiple life insurance policies with multiple different companies.
The trick here is staying on top of managing each policy. Specifically, you want to be extra diligent about paying the premiums for each policy on time. If you miss a payment, that policy can lapse, leaving your loved ones without coverage.
Managing multiple policies with multiple companies might be more work, but it also gives you the flexibility to find the best life insurance provider for your needs right now. For example, if you’re relatively healthy, you might want to choose a company that can help you see savings for your positive lifestyle choices, like our quick, easy life insurance at Sproutt .
Does it make sense to have multiple life insurance?
Is it legal to have multiple life insurance policies? Yes. But is it good to have multiple life insurance policies? The answer here is contingent entirely upon your unique financial situation. But it’s well worth sitting down, looking over your finances, and asking yourself, “Should I have multiple life insurance policies?”
You can take out multiple life insurance policies to cover specific financial obligations, for example. You might get a 30-year term policy to cover your 30-year mortgage and a 20-year term policy to cover the remaining years you expect to pay for your kids.
You can also blend types of life insurance. You could get a term policy that could expire when you’ll be finished with your mortgage, for example, with a whole policy to stay in place for your lifetime to cover your funeral expenses.
In fact, there’s a specific strategy you can use to combine multiple life insurance policies to meet your specific needs. It’s called the ladder strategy.
The ladder strategy
This strategy basically involves stacking different policies on top of each other to meet your changing needs. Let’s lay out an example with three policies:
The above ladder strategy could work for someone who has about 20 years left of their mortgage and about 10 years before their stay-at-home partner plans to work again. The ladder strategy can help you avoid paying for coverage you don’t need while keeping the right protections in place for your loved ones long-term.
Long story short, can you have multiple life insurance policies on one person? Yes. They can be from different companies and can be different types of life insurance, too. You just need to keep an eye on your total death benefit to make sure it aligns with your beneficiaries’ actual financial needs.
One final note: what if someone else, like a spouse or a parent, has multiple life insurance policies and they want the payouts to go to you? Can you claim multiple life insurance policies’ benefits? Yes, provided you’re named as the beneficiary on each policy, you should be able to receive the policy’s death benefit when the insured passes away.
Ultimately, you can have multiple life insurance policies — and you might benefit from stacking your coverage. For help determining the right policy or policies for your loved ones’ present and future needs, contact our life insurance experts at Sproutt.