Welcome to Quotacy’s Q&A Friday where we answer your life insurance questions. Quotacy is an online life insurance agency where you can get life insurance on your terms.

I’m Jeanna and I’m Natasha.

Today’s question: Can I buy more than one life insurance policy?

The answer is yes. You can own multiple life insurance policies as long as the amounts are justified and you do not go over your insurability limit. Your insurability limit is the total amount of coverage you can be insured for across all policies at one time. This limit is usually quite large and most people don’t have any problems keeping under the amount.

And it’s actually quite common to own multiple life insurance policies on yourself. This strategy is called laddering and can be helpful in saving you money over the years.

Your needs change as life goes on. For example, most young families have the greatest financial need during the first 20 years after starting a family. But after kids are grown and out of the house, your coverage needs diminish.

By laddering policies, you can layer multiple policies in such a way that you have varying amounts of life insurance coverage throughout the years, but the coverage overall decreases as your need for it decreases. It ensures you aren’t paying for coverage that you don’t need.

Let’s look at an example to help illustrate this strategy.

Rhett and Scarlett are married and just purchased a home. They also have two young children, both toddlers.

Rhett and Scarlett each purchase a 30-year term life insurance policy with $250,000 in coverage. This ensures that if either of them were to die unexpectedly, the mortgage can be paid off and the family would not have to be uprooted.

They also each purchase a 20-year $250,000 term life insurance policy to provide the surviving parent the necessary financial support to raise their children if either Rhett or Scarlett died suddenly before the children were independent.

Lastly, Rhett and Scarlett each purchase a small $50,000 whole life insurance policy. This coverage lasts their entire lives and can help cover end-of-life expenses.

Now let’s take a look at why this strategy can save Rhett and Scarlett money.

Let’s say instead of laddering the previous policies Rhett and Scarlett decided to just each buy a whole life insurance policy to cover all their needs. They each buy a $500,000 whole life policy that will provide funds to cover the mortgage, raise their children, and help with final expenses—no matter when they die.

These policies do accumulate cash value and can provide dividends, but on a monthly basis, a $500,000 whole life insurance policy will cost Rhett about $517 per month and Scarlett $433 per month.

Or let’s say Rhett and Scarlett decide to each buy a $500,000 30-year term policy to cover all their needs instead of two $250,000 policies with different term lengths.

With the laddering strategy, Rhett is paying a total of $37 per month for both policies for the first 20 years until the first policy ends. Then he only pays $23 per month for the remaining 10 years of his 30-year term policy. And you can see Scarlett pays even less.

If Rhett instead purchased the one 30-year policy with a face amount of $500,000, Rhett would pay $38 per month all 30 years.

If Rhett & Scarlett outlive their laddered policies:

Rhett: ($14/mo x 20 yrs) + ($23/mo x 30 yrs) = $11,640
Scarlett: ($12/mo x 20 yrs) + ($20/mo x 30 yrs) = $10,080

If Rhett & Scarlett outlive their $500k 30-year policies:

Rhett: $38/mo x 30 yrs = $13,680
Scarlett: $32/mo x 30 yrs = $11,520

How much Rhett & Scarlett save with laddering:

Rhett: $13,680 – $11,640 = $2040
Scarlett: $11,520 – $10,080 = $1440

Over the long run, if Rhett outlives his policies, with this ladder strategy he would save himself $2,040. And Scarlett saves herself $1,440.

The laddering strategy can save you some money while simultaneously making sure all your needs are covered through the years.

Most families do not need $500,000 in permanent life insurance, and a household spending nearly $1000 each month on life insurance coverage could spell financial disaster for most realistic budgets. However, laddering term life insurance coverage with a small whole life policy can be very beneficial. And not all families even need whole life insurance coverage at all; oftentimes term life insurance in addition to your everyday savings and emergency fund can provide the right amount of financial protection.

In many cases you can save money by owning multiple life insurance policies, but it’s important to note that each policy has a fixed policy charge. So by owning more than one, you would be paying more than one annual policy fee. However, all the quotes we showed in the previous examples did include these charges, and our fictional friends still saved money.

If you’re unsure what type of life insurance you need, how much to buy, or if laddering is a smart strategy for you, we can help you figure it out. If you have any questions about life insurance, make sure to leave us a comment. Otherwise, tune in next week when we talk about when you should review your life insurance policy. Bye!