Should I get more than one life insurance plan?
Life insurance is a staple of any well-rounded financial plan. If someone in your life would be financially impacted by your death, there’s a strong case for having a policy in place.
But what if you already have a life insurance plan that you’re not sure covers your needs? Does it make sense to take out another policy? It turns out there are certain instances where having more than one life insurance plan could make sense.
Can You Take Out More Than One Life Insurance Policy?
Insurers will likely allow someone to take out multiple life insurance policies without an issue, but they will ask about what existing policies are in place as their interest lies in the total coverage. Once you reach a certain threshold, such as 20 times your income or more, insurers may begin to ask specifics about the intention of the policies.
Here are three situations you may want to consider taking out more than one life insurance plan.
You’re a Small Business Owner with a Family
If you have business and family needs, taking out two term life insurance policies can make sense. You’d have one to cover business expenses or the balance of a small business loan, while the other can provide a financial cushion for loved ones on the home front if anything happens to you.
You Have Evolving Financial Needs
It’s no secret that a family’s financial needs will change over time. When there are multiple children in the household, costs may be higher than when kids are out on their own and finished with college. You could take out more than one life insurance policy and create a policy ladder that transitions with those needs.
For example, you could take out a 10-year, 20-year, and 30-year term policy. The 10-year policy may cover income replacement for a household with young kids, the 20-year policy covers the amount of your mortgage, and the 30-year policy leaves a legacy and covers the kid’s college expenses. That way, no matter what life brings your way, you’ll have sufficient life insurance to cover it.
You Have a Policy Through Work but Want More Coverage
Employer-sponsored life insurance policies are a common workplace benefit. But often, these policies are for small amounts up to the employee’s income. If you want life insurance to provide financial support to loved ones, that amount may not be enough.
You may need to look at a separate life insurance policy, either through the same insurer or another, that provides a more significant amount of coverage to support your family. The general recommendation is five to ten times your income, but coverage will vary depending on your family size and income needs.
The Bottom Line
If your financial needs make it necessary, you can take out more than one life insurance policy. But it’s important that you fully understand the premium payments, policy expiration dates, and terms. Always remember that if you feel your life insurance is getting too complex, you can always loop in a financial professional to help sort out the details.
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