Can You Take Out More Than One Life Insurance Policy?

Can You Take Out More Than One Life Insurance Policy?

13 June 2018

The simple answer to this extremely common question is "yes"; you can have more than one life insurance policy, and it's perfectly legal to do so. In fact, you can have as many policies as you wish, although the total amount of life insurance coverage you can afford will place natural limitations on this. If requesting a large amount of cover or you are a non-working spouse for example, the insurance provider may require additional details to justify the level of cover.

Why Do People Choose to Own Many Policies?

The reasons people choose to take out more than one life insurance policy are numerous. It may be cheaper to purchase a top-up policy for your additional needs than to take out a new policy for the full level of cover now needed or amend an existing policy where the provider allows.

As you get old your health may deteriorate making new policies more expensive. Buying multiple policies may also enable a young person currently at the lowest pay scale of their career to start off with the essential cover, and then add subsequent policies when they can afford or need to, such as when they take out a mortgage.

Do You Need Multiple Life Insurance Policies?

It depends on your circumstances, your needs and your existing policies. Life insurance is designed to protect your dependents financially in the event of your death, with term life insurance doing so for a specific period of time, and whole life insurance covering the entirety of your lifetime or as long as you pay the premiums, dependent upon the policy terms. Particularly in the case of term life insurance, where policies can be outgrown over time, sometimes multiple policies may be the most effective way to match your protection needs.

Initially, many people elect to arrange just one life insurance policy that will best meet their long-term needs. At the time, this might be all they can afford, or all they require. However, as your personal, financial, and family circumstances alter you may need to review your arrangement.

Notable milestones in life that can prompt such a rethink include:

  • Marriage or remarriage
  • Divorce
  • The arrival of children or grandchildren
  • Receiving a significant salary raise
  • Acquiring a new debt
  • Extension of a mortgage term
  • Taking on a larger mortgage
  • A change of job
  • A change in your health

Some policies will allow you to increase an existing life insurance policy to accommodate a change in circumstances. In some cases, you may have the option to increase cover without health evidence which is an important consideration if you have poor health. Many people take the opportunity to review their existing policy when their circumstances alter as this allows them to make sure that their arrangement meet their current needs.

Taking out more than one policy enables you to link each policy term to a specific need such as your mortgage term or your children finishing education. The multiple policies do not cancel each other out, and it can allow you a greater degree of flexibility. However, sometimes the cost of one new policy can be cost effective.

Can You Claim on More Than One Life Insurance Policy?

Again, the answer is "yes." Multiple valid life insurance claims from your beneficiaries are allowed. But remember, it's important to answer all questions accurately on the insurance application whenever you take out a new policy.

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