Just working through whether you need a life insurance policy can be tricky enough. (Hint: you do.) But once you figure that out, it’s easy to fall down the rabbit hole; if one is good, two or more are better, right? Well they’re definitely more. And for some folks more than one life insurance policy can be a great – and necessary – thing.
Why You Could Want Multiple Life Insurance Policies
The key to remember is that you want to have enough coverage to meet loved ones’ needs, for as long as they need. That will depend largely on your financial situation and whether you are married, have kids or other dependents, and how long you expect to support them. But you’ll want to choose an option that you can afford here and now.
Reasons behind a decision to carry more than one life insurance policy run the gamut –– here are a few practical reasons why it could be a good move for you:
Pre-Existing Policy
Some parents take out life insurance policies for their kids when they’re born. While that’s some great planning on mom and dad’s part (you’ve done that already, right?), they’re just thinking of you, not the family you might have one day. You’ll almost certainly need to up the amount with an additional policy.
Insufficient Coverage
If the death benefit through your employer-provided coverage is low –– as in just the bare minimum to cover death-related expenses and possibly pay a few bills –– it’s time to hike that up.
Life Events
Now listen up, because this is especially smart. Some folks who know that they’re going to be out of work pursuing a graduate degree, are planning to have a child, buy a home, or are taking on a new business venture, might opt to take out an additional policy that has a short term limit. Once that life event is over and risks are reduced (back to work, kids are grown, mortgage or loan is paid off, etc.) they could let that policy lapse and fall back on their longer term coverage.
Financial Strategy
Let’s hear it for those savvy planners – this one's for you. “Laddering” is a common term in the insurance world, and it’s a way to always keep a level of coverage that’s equal to your risk, without overpaying. So you might carry $1,000,000 in coverage, but it’s split up between 3 policies that overlap, with the amount eventually tapering off later in life.
This strategy can help to solve the issue of rates rising as you age. Also you might not have to take out another policy in the future and you’ll typically enjoy lower rates over the long-term.
Estate Planning
Besides taking care of immediate financial needs, you might also want a policy that lets you leave an inheritance for children or grandchildren, no matter whether you’re around for another 50 years, or if tragedy strikes tomorrow. Ask about a permanent policy, like whole life insurance.
You can only plan so much for life’s surprises and emergencies. With some sound advice you can be confident that come what may, you have done your duty by your loved ones and can keep caring for them, even if you can’t be there in person.
What to Know About Having Multiple Life Insurance Policies
Certain life situations put you and your loved ones at more risk, and multiple life insurance policies just make sense. But keep a few things in mind if you opt for this route.
Multiple life insurance policies means multiple premiums. So be absolutely sure that you can reasonably afford those payments. It doesn’t make sense to protect your family’s future while endangering financial security right now.
Applying for several policies at once could sound alarm bells to providers. If it looks to them like you’re trying to over-insure yourself – take out more policies than you can afford or that far outweigh your assets, debts, responsibilities (dependents), etc. – they could be quick to reject your application.
Costs for life insurance are typically much lower when you’re young and healthy, so acquiring several that overlap and step your protection down as risk decreases could be a smart move. And yes, you can use the same beneficiary(ies) across several policies.
Alternative to Multiple Life Insurance Policies
Another option to maximize your policy’s value is the addition of a policy rider. For instance, a guaranteed insurability rider could allow you to purchase additional coverage in the future, without having to undergo an exam or provide proof of insurability. A term conversion rider can allow you to convert your term policy to a whole or permanent policy sometime down the road. The terminology might vary between providers but feel free to call on your friends at Althans to decipher and translate.
Sound Life Insurance Advice from Local Experts
Life insurance is a deeply personal and subjective decision – you and your family will need to give it some serious thought. Different goals require different policies and your trusted Althans agent can iron out details and give you the most comprehensive look at your situation. Just know that no matter your insurance needs, there are options to address them. Reach out to set up an appointment and draw on our knowledge to chart the best course forward.