Term life insurance policies, similar to other insurance types, require you to pay a monthly or yearly premium in order to receive a lump sum benefit in the event of a death. In some cases, you may even consider purchasing multiple life insurance policies to reap more benefits.
If you’ve been considering the additional purchase but aren’t sure if it’s the right choice, we’ll break down everything you need to know here.
Is It Possible to Purchase an Additional Life Insurance Policy?
Firstly, yes, it is, and it is more common than you might think. There is little restriction on how many policies a person can take out legally or within a company’s own parameters.
Why Might Someone Want More Than One Policy
When choosing the best term life insurance, a person usually makes their decision on how much coverage they need, based on different factors in their life at that time.
If a 25-year-old purchased a $1,000,000 20-year term policy, meaning their life insurance policy covers twenty years and will pay out $1,000,000 in the event of their death during that time, but then goes on to marry and have children at 35, they will understandably have different needs.
Unfortunately, many life insurance policies lock you into the terms of the initial policy, and there is little room for change to include new beneficiaries or expand coverage, which means you might consider purchasing a new policy that better matches your current needs.
Another scenario for an additional life insurance policy is if your parents had taken a whole life insurance policy out when you were born. In that case, you might consider purchasing another policy when you’re old enough that can cover your current needs, including your own dependents.
Similarly, if your employer only offers a plan with a benefit amount too small to accommodate your family’s needs, then you may look to purchase an additional plan.
A Checklist for Multiple Insurance Policies
With an understanding of situations where multiple insurance policies can be useful, you can look at your own situation to assess whether it’s right in your case. Here are a few questions to ask yourself:
- Does your current policy cover all of your expenses and end-of-life plans?
- Have you added additional dependents since opening your first life insurance policy?
- Have your assets grown since the first life insurance policy purchase? (i.e., new home, starting a business)
- Is your policy a term or whole life insurance option? If a term policy, when does it expire?
With these answers in mind, you can properly research which life insurance policy is right for you, including if additional ones are necessary. It’s always best to speak with a qualified professional to make sure you are making the best decision for your case.
Is There a Downside to Applying for Multiple Insurance Policies?
There is not necessarily an issue with applying for multiple life insurance policies; however, you will want to be sure that you are not attempting to over-insure yourself. Keep in mind that many of the primary life insurance companies share a database, which means that they can cross-check any new applicant’s history.
If it looks as though you’re trying to cheat the system, an insurance agency may ask that you go for a medical examination or simply deny your application to avoid a potential scam for a larger benefit. If you’re simply looking to purchase enough coverage to care for your family, these concerns shouldn’t apply to you, and speaking with a consultant can help you to understand the best choice for you.
