Can I Have More Than One Life Insurance Policy? How it’s a Smart Move

They say two heads are better than one. But what about two life insurance policies? Although it may seem strange at first, it is possible to have multiple life insurance policies. In some situations, it may be the smart move.

How Much Life Insurance Do You Need?

Determining how much life insurance you need is a complicated task. Different people may give your different numbers based on different criteria, and there’s no single right answer. However, this doesn’t mean that your coverage amount should be selected arbitrarily. There are real issues to consider, and you should be able to justify the amount you select.

One way to calculate how much life insurance you need is to take the amount of money your family need each year and multiply it by the number of years your family needs it. For example, let’s say you earn a salary of $80,000 a year. This is how much your family is used to each year. You want to make sure your family is taken care of for at least the next ten years, until your children are grown, and the mortgage is paid off. This means you need at least $800,000 in coverage, or $80,000 multiple by 10.

It’s also important to think about your expected expenses. For example, life insurance can be used to cover funeral costs and any remaining medical bills. It can also be used to cover tuition expenses in the future. When purchasing life insurance for someone who provides childcare, even if that person does not earn a salary, it’s important to think about how much it would cost to pay for childcare.

What If Your Needs Increase?

No matter how carefully you calculate your life insurance needs, your needs will change. Your salary will increase, and your family will become accustomed to having more funds. If you are young and just starting out, you can expect to take on more responsibilities – and more bills – in the coming decades. Tuition costs will go up, an important consideration for any parent.

When this happens, you will need to adjust your life insurance coverage. One way to do this is to keep your existing policy and buy another.

What If Your Needs Decrease?

Some people buy multiple term life insurance policies with different coverage periods. Let’s say you have a lot of responsibilities now – children, a mortgage, and other bills. You need a large benefit to cover all of this. You also want a policy that covers you until you reach retirement in 30 years. However, you won’t need such a high limit for the entire 30 years, since your mortgage will be paid off and your children will be grown long before then.

Instead of paying for more coverage than you need, you can buy multiple policies with varying terms. For example, one policy might last for 15 years and another might last for 30 years. For the first 15 years, the two policies will combine to give you a large benefit. After 15 years, one policy will expire, leaving you with a smaller benefit but also a smaller premium.

You don’t have to limit yourself to two policies, either. You can buy more as needed to fit your long-term needs. This strategy is often called laddering.

When purchasing life insurance policies, the coverage amount should be based on your current and expected needs. However, there is nothing to stop you from purchasing multiple policies and doing some can provide advantages.

Want to learn more? Get a life insurance quote now.