The quick answer is that sure, it is possible to have 2 life insurance policies. Luckily, they do not all have to be purchased from the same insurance provider. However, the more essential issue is: why would anybody want to do so in the first place?
In order to ensure that you have adequate coverage to satisfy the requirements of your loved ones for as long as they need protection at a price that you can afford, it is recommended that you purchase numerous policies.
What are the benefits of having more than one life insurance policy in place?
Purchasing a life insurance policy accounts for the desire to provide for what financial experts refer to as "income replacement." If you die, life insurance gives a lump-sum cash benefit to the beneficiaries of your estate.
It allows them to provide for the individuals who are reliant on your income. There are, however, two reasons why a single strategy may not be sufficient in this situation.
There are many reasons why insurance coverage requirements might vary over time. For example, when a couple gets married, they may like to have a certain amount of protection in place. As they have children, they may want to have more – and in many cases, much more.
However, 20 years later, when the children are on their own, they may want to keep a reduced level of life insurance coverage.
Another reason why one life insurance policy may not be sufficient is because of the risk of death. It is possible to purchase a variety of policies, each with its own set of characteristics. Some of these have extra cash advantages that might be handy while you are still living.
Types of Life Insurance Policies
Term life insurance
Term life insurance and permanent life insurance are the two most common types of life insurance. Both have their own set of pros and drawbacks.
For the most part, term life insurance is the most common kind of life insurance. This is owing to the fact that term life insurance prices are often less expensive than whole life insurance rates. Term insurance plans provide coverage for a defined length of time, or "term." It is commonly between 5 and 30 years.
Once your life insurance policy expires, you will no longer be protected and will get no payout. Even if you want to renew your life insurance policy, your premiums will likely be higher. This is due to the fact that you are becoming older.
Permanent life insurance
Permanent life insurance, on the other hand, ensures your safety for the rest of your life. The insurance also accrues cash value in a tax-advantaged manner. You may utilize it in a variety of ways.
Depending on your policy, you may be able to borrow against your cash value. You can utilize it to make premium payments in subsequent years, or even cash out the policy. This will help to supplement your retirement income.
Furthermore, your health at the time of application determines your rates. They are, however, not influenced by health problems that may arise later in life.
It also makes a difference in how you get your insurance coverage. You may acquire a life insurance policy as an individual. However, many individuals choose group coverage, which is often provided via their employer.
The level of coverage provided by a group workplace insurance might be restricted, but the cost can be reduced. As a result, you should consider purchasing another life insurance policy to provide the security your family needs.
Why it is sensible to have numerous life insurance plans?
Adding to a permanent policy's coverage
Whole life insurance and universal life insurance are the two most frequent forms of permanent life insurance. When compared to term life insurance, these plans provide many significant benefits. They accumulate a cash value that may be utilized while you are still living.
Permanent insurance rates, on the other hand, are far more costly than term life insurance premiums. As a result, you may wish to consider purchasing both a permanent and a term insurance policy.
A permanent life insurance coverage is just big enough to meet your spouse's requirements in the event of your death. The benefits of this strategy include lifetime coverage, cash value accumulation, and the assurance that your spouse will always be protected.
Then you may purchase a term insurance policy to provide additional coverage while your children are still young and living under your roof.
In addition, some parents get permanent life insurance policies for their children while they are still young. This provides them with wealth-building assets with low premiums. When those children begin to have families of their own, they often seek supplementary insurance.
Supplement to the work policy
Many firms provide access to low-cost life insurance as part of their overall pay and benefits package for their employees. This group rate term protection is often less costly than a policy that you would purchase on your own behalf.
However, there are a few reasons why you may want to consider purchasing extra coverage: Your employer's work policy may not be sufficient to satisfy the demands of your family. Adding a second term insurance coverage might assist make up for the loss.
Permanent insurance may help you build up a tax-advantaged cash value while also providing assured protection throughout your life, including retirement. If you quit your work, it is possible that your insurance policy may not be "portable."
It means that you will not be able to take your coverage with you. If you are able to maintain it, you will almost certainly have to pay a higher interest rate. While workplace insurance may be a great employee benefit, it is frequently necessary to complement it with other types of insurance.
Supplemental coverage for a certain period of time
There may be times when you want more coverage, but just for a brief period of time, like while your mortgage is being paid off.
Your spouse may choose to get an additional term insurance policy to provide further financial security at this difficult time in their lives. Once you have returned to work, your spouse will be able to cancel the additional insurance coverage.
Overlapping terms
Term life insurance, in contrast to permanent insurance, has a set expiry date. Typically, if you wish to renew your policy after the term has expired, the rate will be higher.
In certain cases, it will be much more if you have any medical condition such as high blood pressure. As a result, you may want to consider purchasing new insurance before your current one expires.
This method is also known as "laddering," and it might be beneficial for folks who believe their demands will lessen over time as a result of their age. However, there is a danger that you may be diagnosed with a condition that will render you uninsurable.
Rather than buying one policy, you decide to purchase three: a 10-year $500,000 term policy for when the children are young; a 20-year $300,000 term policy that will last until they are young adults; and a 30-year $200,000 term policy (or permanent Whole Life or Universal Life policy) that will remain in force after the children have left the home.
Take Away
The possibility of having various insurance plans is available. However, it is not always the best decision for your circumstances. Increasing the coverage limit of your existing policy may be an option if you want more coverage than is currently available.
In any event, if you believe you may need more than one insurance policy, it is likely that your position is more complex than the average.
We recommend that you speak with a knowledgeable financial advisor who can answer your concerns, assist you in weighing the many considerations, and direct you to the most appropriate policy – or coverages – for your requirements.