Can You Have More Than One Life Insurance Policy?

Some people may not get the right amount of coverage with one life insurance policy and prefer to own multiple. This can be an efficient strategy if you have varying needs, such as separate personal and business life insurance needs, or if big life events occur at different times. In this guide to multiple life insurance policies, Bankrate’s insurance experts review those reasons, and discuss when it is — and isn’t — a good idea to consider having multiple policies for you and your family.

How many life insurance policies can you have?

Technically speaking, you can purchase as many life insurance policies as you want. There are no laws, rules or regulations around the number of policies that one individual can have. Cost is the main parameter to consider when it comes to the feasibility of maintaining numerous policies. As long as you can afford the premiums and your applications are accepted, you can purchase and maintain as many life insurance policies as you wish.

In addition, you can purchase any combination of life insurance policies that you choose. For example, you could purchase two term life insurance policies and one whole life insurance policy. However, there are pros and cons to purchasing more than one policy, and if you choose to buy more than one term policy, there is generally a strategy to doing so.

There is one caveat, though: although technically you can have as many policies as you wish and can afford, there is a limit to the amount of total death benefit you can have from all your policies. Insurers determine your limit by looking at your age, income, assets and how long you plan to work. So, for example, if you have two $5 million policies, and your limit is $10 million, it’s likely that you would be declined for further coverage unless you were able to provide justification of your need for more insurance.

When are multiple life insurance policies a good idea?

Purchasing multiple life insurance policies might make sense in several circumstances. But keep in mind that purchasing multiple policies at once should be strategic and is an approach that may not make sense for everybody. Here are some instances where it could be beneficial to buy two or more life insurance policies:

Supplementing group life insurance

Some companies offer their employees group life insurance at a reduced rate or for free. Generally, these policies have fairly low coverage amounts. It’s also likely that the policy only stays in force while you are working for that company. If you leave, you lose the policy. Having an additional policy to supplement the group insurance can be a good idea to provide more secure and robust coverage that will stay with you no matter where you work.

Significant life events

Our lives are punctuated with significant events: getting married, having a child, starting a business and more. When one of these events occurs in your life, it’s possible that your need for financial protection can change. For example, while you were single, perhaps you had a small final expenses policy to cover burial costs if you were to pass away. When you get married, however, your spouse may rely on you for financial support. If you have children, there might be a need for even more coverage, to ensure that the costs of raising them plus their education would be taken care of if the worst happens. All these scenarios might be reason to purchase another policy.

Extended coverage

If you have term insurance, your coverage will typically lapse after a pre-determined number of years (with some term policies, you can opt to have it automatically renew at increased premiums). As that date nears, you may decide you still want coverage. You can purchase another policy, even if this means you are carrying multiple policies for a short period of time.

Estate planning

Life insurance — including multiple policies — can play a role in your estate planning, especially if you have a permanent policy such as whole life or universal life insurance. The death benefit can form part of your estate, allowing you to leave a legacy to your beneficiaries or a charity that matters to you. Life insurance policies can fund a trust if necessary, as well as help to manage inheritance and tax concerns. It can be a good idea to consult a financial professional when planning your estate to be sure you’re getting the maximum benefit from your financial resources.

Is it okay to apply to multiple insurers at once?

Applying to multiple insurance companies simultaneously for new coverage is not recommended by most insurance experts. When you submit a life insurance application, your request gets recorded in the Medical Information Bureau (MIB), which exchanges confidential coded data about medical conditions and risk factors to alert insurers of potential omissions or errors in applicants’ reported medical histories. When the MIB shows multiple applications, it can make it look like you are applying for more coverage than you really need, which could ultimately lead to denied coverage. Any alerts from the MIB may prompt further investigation by the insurer but cannot alone justify an adverse underwriting decision. There is no harm, however, in asking for quotes from multiple companies, and this practice can help you locate the cheapest possible rates for your coverage. 

Is buying multiple life insurance policies a good idea?

Although buying multiple life insurance policies may be an excellent strategy for some people, it’s not the right option for everyone. Having multiple policies may increase the complexity of your financial landscape, making it difficult or unwieldy to manage. There’s also the possibility that more than one policy gives you more coverage than you need — which could mean you’re overpaying.

One alternative is to ask your insurer if you can increase the coverage for your current policy. In many cases, you may be able to do this without further underwriting or the need for an additional medical exam.

The ladder strategy is one strategy that can help ensure you’re only paying for the coverage you need. This tactic involves buying multiple term policies with staggered dates that correspond with your financial needs. For example, you might have one policy that expires in 20 years, when your children are finished with their education and out on their own; and another one that is a 30-year term providing coverage for as long as you have your mortgage. 

To get a sense of what real people are saying about the benefits or drawbacks of multiple life insurance policies, we looked at the comments appearing in Reddit.com’s r/insurance forum. Here are a few of the comments:

*The quotes and citations included on this page have been verified by our editorial team and are accurate as of the posting date. Outlinked content may contain views and opinions that do not reflect the views and opinions of Bankrate.

Frequently asked questions

• What is the best life insurance company?
  

  No single carrier is always the best life insurance company for all individuals, all the time. The best life insurance company for you is the one that offers the coverage options that allow you to build a policy that suits your need, at a price you can afford. When you’re looking for the right insurer, one strategy that works is to ask for quotes from multiple companies. Quotes are generally free and easy to obtain, and you may even be able to get one by answering a few questions on the company’s website. Just be sure to ask for the same type and levels of coverage from each one, so you can do an apples-to-apples comparison. Another option is to work with an independent insurance agent, who represents multiple companies and can help you find the carrier that is best suited to your needs.

• How much life insurance do I need?
  

  Most insurance experts agree that you should have enough life insurance to cover your family’s financial needs without your income if you were to pass away. To determine how much coverage to buy, add your sources of income together and subtract your debts or recurring costs, like a mortgage. The value left over is the amount of life insurance you might consider.

• Does applying for life insurance impact my credit score?
  

  In states where it is allowed, insurance companies may assess your credit-based insurance score when reviewing your application. Use of this type of credit check shouldn’t affect your credit score.

• Should married couples have multiple life insurance policies?
  

  The best life insurance for married couples depends on you and your spouse’s unique financial circumstances and goals. Purchasing more than one policy might make sense if you have children or depend on each other’s income. Another reason you may want multiple policies is if you have children from a previous marriage and prefer to keep things separate. You could also buy a joint policy covering you and your partner. If you need help deciding which route to take, consider contacting a licensed life insurance agent.