How Many Life Insurance Policies Can I Have?

One of the few things in life that are certain is its uncertainty and changeability. As such, it’s best to be prepared for every scenario.

A solution well-known to many people is taking out at least one life insurance policy.

Given that an extra layer of financial protection is always welcome, you might wonder, “How many life insurance policies can I have?” The answer to this question is quite complex – even though you can take out multiple life insurance policies, it may not always be the best solution in your case.

Additionally, there are many different types of life insurance policies designed to protect various assets. That’s why you may want to decide that one life insurance policy is not enough and start looking for extra insurance cover, especially if you happen to reach significant milestones in your life.

This article will help you decide whether you need an additional life insurance policy or if your existing policy is enough, as well as provide answers to some of the most frequently asked questions regarding life insurance policies in general.

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Different Types of Life Insurance Policies

The right life insurance policy for you will depend on what you need cover for, how much life insurance cover you need, over what period, and when’s the best time to take it out. Below, you’ll find a number of different types of life insurance policies. Read on to learn which one suits you best.

Term Life Insurance Policy

Term life insurance is a policy that covers you for an agreed period of time, for example, 20 or 30 years, which is then considered as the “term” of your policy.

It’s often taken out if you have ongoing financial responsibilities, such as raising children or a major loan to cover (for example, a mortgage). It can also cover other expenses, such as funeral costs.

Term life insurance policy can be further divided into three types:

• Decreasing term life cover – this type of life insurance policy means that the amount of your payout will decrease over time. People often take it out when their financial responsibilities, such as loan repayment, mortgage, or debt, decrease over time. However, there’s an interest cap in decreasing term life cover, meaning the payout may not always cover the entirety of your outstanding debt.
• Lever term life cover – if you take out this type of life insurance policy, your dependents will receive the same amount of money, regardless of the time they need to make their claims. However, level term life cover does not adjust for inflation. For long-term policies, the increasing cost of leaving is likely to make the amount of the existing cover worth less over time, if not insufficient.
• Increasing term life cover – this type of policy is completely opposite to the decreasing term life cover, meaning that the amount your insurer pays out will increase over time. It’s specifically designed to adjust and mitigate the effects of inflation. The increase can either be index-linked (in-line with inflation) or a fixed rate, which can be more beneficial if you keep it long enough. This way, it may rise faster than the inflation rate. Regardless of the increase type, this type of life insurance policy offers an attractive solution for people whose families might need more assistance as the years go by.

Whole Life Insurance Policy

As the name suggests, a whole life insurance policy covers you for the whole of your life, rather than a fixed period of time. In this case, you need to pay your monthly premiums without worrying about a policy term because it won’t expire.

In the event of your death, the insurer will give your loved ones the payout. This type of policy gives you worry-free cover with straightforward terms.

Whole life insurance policies, also known as “life assurance,” are usually more expensive than term life insurance. However, some can be cheaper, provided they cover shorter periods for smaller payouts. Such policies also won’t have additional options, such as borrowing against the value of the policy.

Joint Life Insurance Policy

Simply put, joint life insurance is life cover for yourself and your partner in one policy. It insures two people at the same time and pays out if one of you passes away.

Joint life insurance policies can be viable for you and your partner or spouse. However, depending on your circumstances, having one joint life insurance may not be as cost-effective as having two separate life insurance policies.

It may also require your beneficiaries to pay inheritance tax with no deductions (which would not be the case if you put one of your policies in a trust). The best way to find out which is cheapest for you is to compare quotes.

Over 50s Life Cover

This type of policy does not really differ from whole life policies. However, it’s suitable for people who reach a certain age – as the name suggests, they must be 50 years old and above.

Additionally, over 50s life insurance differs from standard life insurance policies because it’s designed to cover you for the rest of your life, on the condition that you keep up with your payments.

No medical exam or test is needed, and you likely won’t be asked medical questions. Nevertheless, your payments might be higher if you happen to be a smoker.

Taking out an over 50s life insurance policy can help your surviving partner and family deal with your passing and various financial obligations that are related to it – for example, by covering funeral costs.

You may also want to leave it to them as a gift. In this case, if you want to maximise the payout, consider putting your life insurance policy in a trust. This way, it won’t be liable to inheritance tax and won’t fall within your estate.

Critical Illness Cover and Children’s Cover

These policy types typically provide payouts as a single lump-sum payment when you or the insured child becomes seriously ill. However, you need to read terms and conditions carefully because there’s a finite number of illnesses covered by such a policy, and the length of the policy itself might differ depending on a provider.

All in all, critical illness cover is considered a very sensible addition to your existing policy. Many people often take out additional cover for their children.

Another policy that’s similar to critical illness cover is terminal illness cover. In this case, your family will receive a lump sum if you’ve been diagnosed with an illness from which you will die in the next twelve months.

Benefits of Having Multiple Life Insurance Policies

Having multiple life insurance policies has several advantages – the biggest one being the ability to cover various financial responsibilities, such as a spouse, children, mortgage, funeral costs, or tuition fees.

Your beneficiaries will have more financial support in the event that you won’t be there to help them, which will undoubtedly help ease some of their worries.

If you’re in a relationship and take out two life insurance policies or more, your loved ones will receive two (or more) payouts. In the case of a joint life insurance policy, both spouses must pass away before the beneficiaries can receive their payouts.

Additionally, having multiple life insurance policies rather than just one life insurance policy gives you the option of putting one of them in a trust.

This way, you can reduce the inheritance tax due when you pass away. Once in trust, your life insurance policy won’t contribute to your estate, meaning you’re less likely to meet the inheritance tax threshold.

Drawbacks of Having Multiple Life Insurance Policies

While having multiple policies has many benefits, we must also mention its drawbacks. These can be divided into potential issues for policyholders and beneficiaries.

As a policyholder, you need to remember that you have to finance your premium payments on a regular basis. The more policies you have, the more difficult they can be in terms of management, for example, because of different payment due dates.

Additionally, having multiple life insurance policies may not be the best solution based on your circumstances. Sometimes creating a joint policy or taking out different types of additional coverage may be more cost-effective.

If you’re unsure which option would be the best for you, you can always ask a professional advisor for some assistance.

As for the beneficiaries, they will have to make multiple claims to get payouts from all life insurance policies you take out.

More often than not, this process is complicated, tiring, and time-consuming. Nevertheless, many consider it to be worth it, given the final outcome.

Frequently Asked Questions

In this section, we answer some of the most frequently asked questions regarding life insurance policies.

Is it legal to have more than one life insurance policy?

Yes, it is legal to have more than one life insurance policy. That’s because different policy types work best for protecting different types of assets, and you may want that extra coverage at some point in your life.

You can also purchase additional life insurance policies at different times and combine them according to your budget and family needs.

How many life insurance policies can I have?

You can have as many life insurance policies as you want and can afford; there is no legal limit.

How do life insurance policies work?

The process is relatively simple. First, you need to pay a fixed premium. Premium costs are influenced by a number of factors such as age or lifestyle.

Keep your payments up, and your cover will last for the entirety of the agreed period – depending on the policy type, it can last for life. Additionally, some providers don’t require you to make payments when you reach a certain age and allow you to keep your life insurance cover.

Finally, your loved ones receive a fixed cash lump sum upon your passing. Some providers will return the premiums you paid in the case when you’ve only had your life insurance policy for a couple of years.

Can I have more than one beneficiary on my life insurance policies?

Yes, you can have more than one beneficiary on your life insurance policies. However, the form of the payout from your policies tends to differ, depending on the policy type.

Usually, the pay-out would form part of the policy holder’s estate for a single life insurance policy. On the other hand, the payout would typically go to the surviving policyholders in the case of a joint policy. Still, multiple beneficiaries can claim multiple life insurance policies in your name.

Do I need more than one life insurance policy?

The answer to this question is not as straightforward as you might think. You know that it is possible to have more than one life insurance policy. However, the fact that you can take out multiple policies doesn’t mean that you absolutely have to do it.

Depending on your needs, you might decide that you want to have additional life insurance cover. However, it might be better to simply adapt your existing deal according to various events and milestones in your life in many cases.

When should I change my existing life insurance policy?

There are several life events that may prompt you to consider changing your existing life insurance policies and increasing your cover.

These include, but are not limited to:

• Remortgaging or taking out a new mortgage
• Having an increase in remuneration either by change of employment or promotion
• Becoming a parent (by having biological children or by adopting a child/stepchild)
• Getting married
• Entering a civil partnership

Can I have a life insurance policy with more than one company?

Yes, you can take out multiple policies with more than one company. Legally, it’s not possible to claim against each policy. However, we recommend choosing one provider and sticking to it, especially if you consider taking out more than one policy. This way, you’re more likely to get the best premium payments. You may also strike a deal with your provider if you show them you managed to find a more favourable offer.

When is the best time for me to take out life insurance policies?

As we mentioned before, this answer will depend on your individual needs. You may want to take out life insurance policies earlier and have lower premium payments. However, you may also decide to secure your assets upon major life events.

Ultimately, it’s up to you to decide when’s the best time to take out your first life insurance policy, change your existing cover, or opt for multiple policies at once.

Keep in mind, though, that it’s always better to have at least some form of insurance coverage than have the worst-case scenario happen to you while you’re completely unprepared.

Can you have more than one life insurance policy: Key takeaways

There are many different types of life insurance policies, as well as other types of policies that may protect the livelihood of you and your family.

Answering the most burning question, you can legally have as many life insurance policies as you want. However, we encourage you to think your options through and make the best decision according to your circumstances.

You can take out more than one policy if your existing deal no longer fits your needs but consider looking for life insurance arrangements with the same provider. This way, you’re very likely to receive extensive coverage at a reasonable price. After all, it’s better to be safe than sorry!

Why Use Insurance Hero?

Regardless of your profession, age, and lifestyle, experts at Insurance Hero can help you find the best life insurance policy suited to your needs. We work with reputable insurance providers who are ready to offer you a sensible deal at a reasonable price. Take care of yourself and your loved ones today, and reach out to us!