More than one life insurance policy

Life Insurance pays out a fixed amount of money (chosen by the policyholder) to certain beneficiaries upon the death of the policy’s principal. It can prove to be a very useful long term financial vehicle to many, and indeed be essential to some, as dependents who have lost a partner might also have lost their means of financial security. Life insurance provides that sense of monetary peace, where in the immediacy of such a traumatic loss from their lives, they are not burdened by living expenses, funeral bills or an unpaid mortgage. That being the case, it’s important to know how life insurance works, and a frequently asked question is whether a person can be the holder of more than one life insurance policy. It’s a good question, with some varied answers; let’s examine that issue and related topics below.

Why Would You Want Multiple Policies?

Providing a financial lifeline to your dependents or estate after you’re gone is what’s considered “responsible financial planning”, and in effect means having all of your affairs in order so that your passing does not result in further difficult circumstances for those you’ve left behind. What this means in relation to life insurance policy, is making sure the payout your policy provides upon your death is enough to cover the expenses and costs you originally took this policy out for. It might be for just funeral costs, or maybe it was for an as-of-yet- unpaid long term loan agreement, or further still to provide living expenses for those who depended on you, when they might not have the appropriate funds themselves. Many Life Insurance Providers have maximum limits on their coverages available, and this might not be enough for what you envisage this policy to be for. Perhaps a £10,000 limit is the maximum payout available – this might cover funeral expenses for example, but in terms of a greater financial obligation, probably not. This is why people look to purchase more than one policy, as it can increase the amount of money paid to their beneficiaries upon death.

Can You Even Have More Than One Life Policy?

Yes. Many other types of insurance policy only allow you to have one policy for that particular cover. Car insurance for example, or home contents insurance. This is because these policies can only pay out once for the monetary loss you’ve suffered, as although you should not stand to lose any monetary value from a car theft claim, neither should you stand to gain anything either. As a benefit policy, life insurance works in a different way, and you can purchase as many life insurance policies as you need to. However, do make sure you don’t buy more life insurance than is necessary, should disputes arise regarding unsanctioned potential financial gain.

How Many Life Insurance Policies are Allowed?

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In practice, one can have as many life insurance policies as one is able to afford. However, this comes with certain caveats. Upon purchasing life insurance with an insurance company, a question you will usually be asked is whether you already have a life insurance policy. Saying yes will prompt further questions on the total value of your life policies, and if it’s high, to justify the costs. You must only purchase an amount of life insurance that makes sense relative to your personal circumstances, and not significantly more than that. If it is found that these life policies are being purchased for unaccounted reasons or expenses, questions surrounding eventual claims payment are likely to follow. If you need help looking at how much life insurance policy you need, it is recommended you get in touch with an appropriate independent advisor.

Can You Have Multiple Life Policies With More Than One Company?

Yes. You are under no obligation to purchase life insurance from the same company, and in fact it might be better to do so. Many companies will actually limit the amount of coverage you can purchase with them, so perhaps you’ve obtained £25,000 in one policy, and are looking to purchase another policy in the region of £50,000. Multiple policies may be allowed, but there could be a maximum payout per policyholder or £40,000. It is important to check your policy terms and conditions, which will provide clarity on this.

Another reason to think about purchasing more life insurance policy with more than one company is known as “risk-spread”. Whilst life insurance payouts are some of the highest in the insurance industry at >95%, there is the risk (however small) that a company might not pay out, or descend to a state where it’s unable to meet its policy responsibilities. More than one life insurance policy with more than one company decreases this risk.

Where Can You Buy Multiple Policies From?

The market for life insurance can be intimidating, but there are many avenues one can take in order to buy multiple life policies that also fit your needs. Price comparison websites are a rich source of jargon-free advice, and easy-to-read-tables that allow you to find which insurance providers work for you. If you are not so tempted by using the internet, one can also engage the services of a life insurance broker, who will be happy to find the policies that work for you.

Could I Just Increase My Current Levels of Life Insurance Instead?

You might certainly be able to increase the coverage limits on your current life policy if your circumstances change or you just don’t feel you have enough. However, mid-term amendments might not be possible, or could incur extra administrative costs that make it more financially effective to purchase a whole new policy, with a different insurer instead.

As a Beneficiary, Can You Claim on Multiple Life Insurance Policies?

Yes. If you are a beneficiary, named on multiple life policies, you are allowed to claim on them all. What you must have is the proper life insurance documentation and the appropriate death certificate to present to the insurance provider.