Can You Have Multiple Life Insurance Policies?

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Life insurance is a great way to provide coverage for your loved ones or business. But over time, you may need more protection than you once did. Taking out multiple life insurance policies may be an option, although it’s not the only way to boost your coverage.

Here’s what you should know about buying an additional policy so you can make the right decision for your situation.

Are There Limits on How Many Policies You Can Own?

There’s no limit on the number of life insurance contracts you can have at the same time. So, buying a new policy to supplement an existing one can be a viable way to increase financial protection for your loved ones.

However, insurers set caps on the total amount of coverage you can take out, depending on your age and income. For example, a 30-year-old might be able to take out multiple policies with a total face value of 30 times their annual earnings. But for a 60-year-old, that limit might be 10 times their yearly income. Each company sets its own limits, so those numbers can vary.

Most insurance companies ask about any existing policies when you apply. They can also find that information by checking the Medical Information Bureau, a clearinghouse for insurance data. So, be honest about your current coverage and any personal or financial information you provide.

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When It May Make Sense to Own Multiple Policies

After buying a life insurance policy, regularly review your coverage to make sure it provides the safety net your beneficiaries need. You may want to consider an additional policy if:

  • You experience a major life event, like a marriage, the birth of a child, or the purchase of a new home.
  • You want to stagger your coverage to provide extra protection during certain high-need years, such as when your children are young. For example, you may want a 30-year term policy worth $500,000 and a 10-year term with a separate $250,000 death benefit. Or you might choose to supplement a whole life policy with a term policy that provides additional coverage during those more expensive years.
  • You started a business and want a policy that can keep it afloat as your employees search for a replacement.
  • You have permanent insurance that can help your family cover final arrangements but need term coverage for a certain period.
  • You have a modest group insurance policy through your employer but want additional coverage to meet your family’s needs.
  • You’re older or less healthy than when you took out your first policy. You’ll likely pay more for new coverage, so you may want to keep your initial policy and only buy the extra protection you need.

Alternatives to Buying Multiple Policies

Purchasing multiple life insurance policies is a common strategy, but it’s not the only way to increase the total coverage amount your family or business needs. Choosing the right option comes down to your specific circumstances.

Replace Your Current Policy

You may be able to take out a larger life insurance contract that replaces your original policy. Replacing your existing policy generally makes sense if a new, larger policy is less expensive.

For example, insurance companies have “breakpoints”—certain thresholds where the price for every $1,000 of coverage starts to decrease. That means a single $500,000 policy may have lower premiums than two $250,000 policies.

Also, except for guaranteed issue policies, most insurers require a medical exam and health questionnaire when you apply for coverage. If you don’t have any significant medical issues, you may qualify for a competitive rate on your new policy.

Purchase Riders

If you have a permanent life insurance policy, you can consider purchasing riders—or optional features—that allow you to increase your coverage later. For instance, a term life insurance rider enables you to buy additional term coverage that gives your beneficiaries a larger payout if you pass away within a certain period.

Securing the Protection You Need

Having the life insurance you need for your family or business can give you greater peace of mind. Talk to a Colonial Penn agent today to review your coverage and see if a new policy is right for you.

Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.

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