How many life policies can you have?
Guessing if this is the question you are asking it is probably because you are interested in having more than one life insurance policy. Good news for you smart planner, the answer is yes! You can have more than one life insurance policy at any time. You can have different policies with different companies for different amounts with no problem.
What we will cover:
- How many life insurance policies can you have?
- What are the benefits of having multiple life insurance policies?
- Is there a downside to having multiple life insurance policies?
- How do I go about getting multiple life insurance policies?
How many life insurance policies can you have?
There really isn’t a limit per se to how many life insurance policies you can have. You can own multiple life insurance policies from the same or different companies for different coverages. Unfortunately, that doesn’t mean you can get 50 policies worth a billion dollars total. Life insurers tend to look at what existing coverage you already have to make sure that the new policy you are buying won’t have you exceed your “insurability limit”. This limit is usually 20-30 times your annual income.
Why is there an insurability limit? Glad you asked! This limit exists because life insurance is designed to replace your income or sometimes call earning power. The goal is not to considerably increase the wealth of your beneficiaries. In other words, insurers don’t want your death to become appealing to others. You wouldn’t want to give reason to be the star of The Most Dangerous Game.
What are the benefits of having multiple life insurance policies?
Before we dive into the benefits and you go buy yourself 200 policies, let’s start with some of the details. Having multiple life insurance policies is often referred to as laddering. More specifically term life insurance is the most common form of life insurance for laddering since it is cheaper than whole/permanent life and you can choose different coverage amounts and term lengths.
Now that we got that housekeeping out of the way, let’s talk about some scenarios where this could be useful. Say, for example, you’re the breadwinner and you want to cover things like your income, mortgage, college debt, etc. Instead of buying a $1 million life insurance policy, you could opt to buy three-term policies that have the length of time (term length) and coverage needed to cover each item like:
- 10-year, $500,000 term life policy that covers the rest of your mortgage
- 20-year, $300,000 term life policy that covers your kids getting out of college
- 30-year, $200,000 term life policy that covers your spouse after most large debts are probably already paid off.
You may have noticed the term lengths also overlap which is a key part of laddering as well. So, if you die within the first 10 years, all three will get paid out covering your family from top to bottom. If you die in the first 20 years, then your 20-year and 30-year provide your family security for that stage in their lives and so on.
Why you may need more than one life insurance policy
Here are some other common scenarios that you may want to buy additional policies for:
- If you’re a small business owner and you need loans covered
- Final expenses like your funeral, burial, tree pod, aquamation, etc. Whatever your post-life dream maybe!
- Leaving an inheritance to someone or some beneficiaries.
This strategy can help save money if you know your debts are going to be consistent with no major surprises. This is great to keep in mind especially if you get the policy when you are younger and in good health so your premiums will also be cheaper as age plays a role in your premium costs.
“But wait! There’s more!”
“More you say?!?”
Life insurance through Waffle gives you the option to ladder with any policy which means you can change your coverage amount at any time which also would change your premium. Typically to change your coverage amount, you would need to cancel your existing policy and apply for a new one which as time goes by means you continue to pay a higher premium each time. But with Waffle, you DON’T have to cancel. You can simply adjust. Simple as that. So, the scenario could look like this:
- 30-year, $1 million life policy that covers your mortgage, kids’ college, and income
- 10-years later, decrease coverage to $500,000-$750,000 since your mortgage and other debts are most likely lower than they were so you no longer need the full $1 million coverage
- 10-years later, drop your coverage again to $200,000 - $500,000 now that your kids are out of college and those debts are paid.
The major benefit here is you don’t have to keep reapplying for a new policy and getting your rate flung around from the window to the wall. This of course is a bit summarized, and you can ladder more frequently to what fits your situation best.
Is there a downside to having multiple life insurance policies?
There isn’t really a downside to having multiple life insurance policies. As mentioned above it’s entirely situational and what the goals are you want to hit. Some people will find this an easier way to plan but we have heard using the ladder system with Waffle is not only easier to manage but saves a lot of time from having to apply so many times. You can get a price in about 5 minutes entirely online with no medical exams up to $3 million in coverage. It’s an easy-breezy way to go and gives you far more flexibility.
How do I go about getting multiple life policies?
Simple. Just got to apply. There really isn’t much to it. Just keep in mind your total coverage amounts and that the life limit sits around 20-30 times your income so if you start getting rejected suddenly, this might be why.
If you are going to get multiple life policies, it’s good to keep in mind the new events in your life that happen that could encourage getting more coverage. For example, you have $300,000 coverage for your mortgage, but you go buy a new house and your mortgage jumps to $600,000. You will want to be sure to do something to help cover that additional $300,000 that has now been added to your debt.
Frequently asked life insurance questions
Why term life insurance vs whole life insurance?
Term insurance protects your family for the 10-30 years they depend on you most. When your term ends, your monthly payments end too. Term coverage is much more affordable than whole coverage, which can last if you pay for it.
How much insurance do I need?
10x your salary is the quick math. It may sound like a lot but think of everything it could be used to cover: a mortgage, debt, higher education, an emergency fund, and more. The addition to this rule is 10x your salary + 100k for each child for college. If you're looking to learn how to calculate how much term life insurance is needed, we got you covered.
Will Waffle be around to pay my claim?
Our policies are issued by insurers with long, proven histories of paying claims. They’re rated A+ by A.M. Best and, like us, they’re not going anywhere. Still, here’s when a policy may not pay out: death by suicide, and fraud if certain criteria are met.
When does it make sense to have multiple life insurance policies?
Many people get additional policies because their employer-sponsored group coverage doesn’t either offer enough coverage, or they want something that will stay with them if they leave that employer. You might want a policy specifically for a certain debt or to ladder other policies.
What happens if you have two life insurance policies?
It really depends on the type of policies you own but at the end of the day, each policy will continue to provide coverage. If you have term policies, then they will continue to provide coverage until that term runs out or unless you terminate it. Permanent will not expire until you cash it out in retirement or pass away.
Am I locked into paying my premium until the term is over?
Nope. Term life insurance can be canceled at any time with no fees or hand slaps. Just a kind farewell bid you ado. Term life policies are paid on a monthly basis so there really is no long-term commitment. If you need to reduce your monthly cost because of a life situation, with Waffle you can always ladder your premium cost down low until you get your feet established then change your amount again. This way you keep your same rate.