Can You Have Multiple Life Insurance Policies?

You can purchase multiple life insurance policies from either the same company or multiple different insurers, although there is generally a limit on the total amount of coverage you can have at one time. Buying multiple term life insurance policies that will expire at different times can address your changing coverage needs over time while also potentially saving you money.

Read on to find out more about when you can have more than one life insurance policy, what the benefits are and how you can obtain coverage.

Key Takeaways You are allowed to have more than one life insurance policy at a time and may want to do so if your coverage needs change due to major life events, you want to plan for your future or your children’s inheritance, you own a small business or your employer life insurance policy doesn’t provide enough coverage. Laddering is a strategy that involves buying multiple term life insurance policies with different coverage amounts and coverage periods so that your coverage will automatically adjust to match your changing needs over time. Insurers may only allow you to maintain 15 to 35 times your annual income in life insurance coverage across all of your policies.

When Should You Consider Multiple Life Insurance Policies?

See below for an overview of various situations in which you may benefit from getting two or more separate life insurance policies.

Major Life Events

If you already have life insurance, you may consider buying additional policies after major life events reshape your coverage needs. For example, if you and your spouse first purchased life insurance at a time when you planned on having three children but ended up having 10 children instead, you may need to buy another policy to secure a high enough death benefit for all of your beneficiaries.

Alternatively, if you have rented a home for most of your life but decide to buy a home later in life, you may want to add a 30-year term life insurance policy to your existing coverage in order to match your 30-year mortgage.

Keep in mind that life insurance premiums are generally lower the younger and healthier you are when you buy coverage, so it may be cheaper to go ahead and buy a second policy now rather than waiting until your current policy expires to buy a new one.

Financial Planning

While term life insurance is great for obtaining affordable coverage for a set period of time, you may also want permanent life insurance as a way to plan for your financial future. Permanent life insurance policies grow cash value over time that you may eventually be able to withdraw or borrow against. In particular, variable life insurance policies have uncapped cash value growth potential, allowing them to effectively act as investment accounts.

However, permanent life insurance policies tend to be more expensive since they don’t expire and variable life insurance policies can even lose cash value. As a result, you could buy a term life insurance policy with a higher death benefit that serves the purpose of providing for your loved ones in the event that you die while they still rely on your income and a variable life insurance policy with a lower death benefit that serves the purpose of accruing cash value that could act as a financial windfall for you or your beneficiaries later on.

Long-Term Care

You could also consider getting two life insurance policies if you think you will ever need long-term care services. Although long-term care insurance is often available as a life insurance rider, any money you withdraw to pay for long-term care will generally be subtracted from the policy’s death benefit.^[1]

For this reason, you may want a permanent life insurance policy without a long-term care rider if you want to make sure your beneficiaries will get the full death benefit after you die. You can then opt for a second policy with a long-term care rider to secure coverage in case you eventually need support with daily living activities. If you end up not needing long-term care, your beneficiaries will receive two full death benefits, so at the very least your premiums won’t have gone to waste.

Estate Planning

Life insurance can enable you to help your dependents cover certain expenses after you die but you may also want to use it to provide an inheritance for your children and other loved ones. Buying multiple policies may make it easier to ensure you can do both.

For example, you could buy both a whole life insurance policy with a large death benefit that will go toward your estate and a burial insurance policy with a small death benefit that can help your family members cover your final expenses such as your funeral and burial or cremation.

You Own a Small Business

Small business owners may want separate life insurance policies for their personal and business expenses. For example, you could have one term life insurance policy that is designed to replace your income for your dependents through your retirement age and another that can help your business finish paying off a commercial loan.

To Add to Group Coverage

Even if you already have group life insurance through your employer, it’s often worth purchasing a separate supplemental life insurance policy since job-based life insurance policies usually come with fairly low death benefits. Employer-sponsored policies typically provide one to two times your salary in coverage, while some experts recommend maintaining 10 to 30 times your salary in coverage.^[2]

There are other reasons to consider supplemental life insurance as well. For example, group coverage you obtain through work may expire once you retire and may not be portable, meaning your coverage will be canceled if you take a job at a different company.^[3]

How Does Having More Than One Life Insurance Policy Work?

One way to efficiently secure life insurance coverage that adapts to your changing coverage needs is to ladder your policies. Laddering refers to buying multiple term life insurance policies that start at the same time but will expire at different times so you don’t pay more in premiums than you have to and can maintain the highest amount of coverage when you need it most.^[3] For example, imagine you make $50,000 a year and want coverage that could replace your income for the next 30 years if necessary.

While you could buy a 30-year term life insurance policy with a $1.5 million death benefit, you may not need the full death benefit toward the end of the policy period since your children will likely be out of the house and you will be close to paying off your mortgage. You could also buy a 10-year policy with $1.5 million worth of coverage and buy a new policy with less coverage after the first one expires but you will likely encounter higher rates when you shop for life insurance later in life.

Instead, you could buy a 10-year policy with a $700,000 death benefit, a 20-year policy with a $500,000 death benefit and a 30-year policy with a $300,000 death benefit. This will still provide you with $1.5 million worth of coverage for the first 10 years but your coverage amount and premiums will drop over time as your policies expire. This could help you save money in the long run since you will only be paying for the highest coverage amount when you are most likely to need that much coverage.

Which Life Insurance Policy Is Primary if I Have Two?

If you have two life insurance policies, there is no primary policy since both policies will pay out the entire available death benefit to your beneficiaries if you die during the coverage period. However, you can give each policy a different set of primary beneficiaries and contingent beneficiaries, with the latter only receiving a payout if the primary beneficiaries are unavailable.

For example, if you have two children, you could gift life insurance to both of them by buying two policies and setting each of them as the primary beneficiary on one policy and the contingent beneficiary on the other. This way, you can plan for both of them to receive their own life insurance payout after you die but, if one of them dies before you, the other can claim both death benefits.

Are There Limits on the Amount of Life Insurance You Can Have?

There is no legal limit on the amount of life insurance you can have but insurers will generally only offer you between 15 and 35 times your yearly income in coverage across all of your policies, with the exact amount depending on your age and your life insurance company.^[4] Even if you go to a different insurance company to buy another policy, the insurer may check the policies you already have in place to make sure you don’t exceed your insurability limit.

How To Get Multiple Life Insurance Policies

If your current life insurance policy isn’t fully meeting your needs, you may want to collect quotes from three to five other life insurance companies so you can find a supplemental policy. Of course, it can be a burden to reach out to several insurance carriers individually to give them information like your age, health status and income.

That’s why you should streamline the process by using SmartFinancial’s online insurance marketplace platform. Simply fill out a questionnaire about your coverage needs and budget and we’ll connect you with agents who can match you up with personalized life insurance quotes. Click here to get started on receiving life insurance quotes at no cost today.