Can you have multiple policies?
Guessing if this is the question you are asking it is probably because you are interested in having more than one life insurance policy for your coverage needs.
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 life insurance companies for different amounts with no problem.
What we will cover:
- Multiple policies and life insurance coverage
- 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 may choose to buy as many insurance plans as you wish. There isn't any legislation regarding how much an individual may have policies.
The cost factor must be carefully considered when planning for the practical maintenance of many policies. If it is feasible and you get a high-value premium, you may purchase as many policies as you wish. You also have the option of choosing from multiple life insurance options.
Despite the fact that there is no limits to purchasing a life insurance policy, that doesn't mean you can get 50 policies worth a billion dollars in total. Life insurance providers tend to look at what existing life insurance 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 a life insurance policy is designed to replace your income or sometimes called earning power. The goal is not to increase the wealth of your beneficiaries considerably. In other words, an insurance provider does not want your death to become appealing to others. You wouldn't want to give reason to be the star of The Most Dangerous Game.
While you can purchase life insurance from multiple insurers, it's best to decide on your financial needs before sticking to only one life insurance policy or getting even more coverage.
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 a ladder strategy. More specifically term life insurance is the most common form of life insurance for laddering since it is cheaper than a permanent life policy 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, income replacement, or other factors. 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 a death benefit with 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.
Having one more than one policy can help provide financial protection for your loved ones in case of a dire life event.
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 for your financial situation
- 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. Determining your life insurance coverage early can help with getting lower life insurance rates.
“But wait! There's more!”
“More you say?!?”
“YES! MORE!”
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 this, 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 from a life insurance company 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 buying multiple policies besides a coverage limit with the insurability limit. As mentioned above it's entirely situational and what the financial goals are you want to hit.
For your personal finance goals, determine how much coverage you will need in addition to your existing coverage. If you're using the ladder system with Waffle, it is not only easier to manage but saves a lot of time from having to apply to another life insurance company.
You can get an estimate in about 5 minutes entirely online with no medical exam and up to $3 million in coverage after answering a few health questions. It's an easy-breezy way to go compared to a permanent life insurance policy and gives you far more flexibility.
How do I go about getting multiple life policies or more coverage?
Simple. You just have to apply. There really isn't much to it. Just keep in mind your how much coverage you need, what your total coverage amount is for your desired death benefit, and that the life limit sits around 20-30 times your income. So if you start getting rejected suddenly by an insurance company while applying, this might be why.
Final Notes
If you are going to get multiple life policies, it's good to keep in mind the new life events that happen that could encourage getting more coverage for financial support. 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 coverage of $300,000 that has now been added to your debt.
Frequently asked life insurance questions
Buying the cheapest policy for additional coverage
Although you should choose the best insurance policy with a reasonable cost, you should also think about the benefits you will receive from that insurance. Life insurance policies have some complex features that should be understood.
Typically term life insurance costs less than permanent life insurance. Term life only entitles you for a specific period while permanent life coverage will cover your life after you are unable to die if you are paying a higher premium. When your term ends, your monthly payments end too along with your coverage for a death benefit. For people claiming life coverage for a specific period of 20 to 30 years, term-life policies can help reduce the cost of the coverage compared to permanent life insurance.
How much life 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 in case your health deteriorates. 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 life insurance 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 coverage 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 a term life insurance policy, 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.