Can I buy more than one life insurance policy?
Yes, you can buy more than one life insurance policy. In fact, buying more than one life insurance policy is a great way to ensure all your needs are covered while also saving money in the long run. Keep reading to find the best way to layer multiple life insurance policies.
Shopping for the perfect online life insurance policy can be overwhelming, but with Quotacy at your side, it doesn’t have to be. If you have different coverage needs, you can comparison shop pricing for more than one life insurance policy easily online. Get life insurance quotes instantly without being required to give away any contact information with our quoting tool.
Here we highlight when it might be beneficial to purchase multiple life insurance policies online. This is called laddering life insurance policies and it’s a great strategy to save money without having to compromise on coverage.
» Compare: Term life insurance quotes
Can I own multiple life insurance policies?
For most people, your financial situation and coverage needs change as life goes on. This is why it’s common to own different life insurance policies with different term lengths or coverage amounts.
Most young families have the greatest financial need the first twenty or so years after starting a family. With the majority of earned income going toward a mortgage/rent and raising children, let’s take a look at why buying two policies would be beneficial in this scenario.
You just had your first child and to fit your growing family, you bought a new house. In this scenario, there are two financial responsibilities that you would want to make sure are covered:
- Mortgage for your home
- Future expenses for your child
Policy 1: 30-year term for $250,000
Your mortgage is a 30-year fixed-rate loan for $250,000. You can buy a term life insurance policy to match your mortgage so, if you were to die suddenly, your family could pay off the mortgage and wouldn’t have to sell the house.
If you live a long, happy life, the coverage is designed to drop off once the mortgage loan is paid.
Policy 2: 20-year term for $250,000
To supplement the policy that will cover your mortgage, a second policy could be used to make sure your spouse is able to take care of everyday expenses like food, clothing, and childcare. This will give them the much-needed funds for the years your children are not financially independent.
Together, these policies would provide financial support to your loved ones should you pass away during their most financially vulnerable years.
Want to see what you’d pay for life insurance?
Compare the best prices from the names you know and trust, all in one place with no commitments.
How Much Life Insurance Can I Buy When Laddering Policies?
Life insurance companies do not have restrictions when it comes to buying multiple policies—as long as you’re eligible and approved for the coverage.
For example, a single, childless person making $50,000 a year cannot justify buying multiple million-dollar life insurance policies on themselves for two reasons:
- The insurance company would be cautious as to why someone with no spouse or children would want to insure themselves with that much coverage.
- They would be wary of the person’s ability to consistently afford the premiums.
There are a lot of costs that go into insuring someone. This includes administrative costs, medical exam and testing costs, and potentially having to pay out a large death benefit. So, life insurance companies weigh all the risks for those who apply for coverage.
That being said, if you have the justification and insurable interest for owning multiple life insurance policies, then doing so can be very beneficial.
» Calculate: Online life insurance policy needs
Let’s go over three scenarios in which laddering life insurance policies may be a good idea.
Scenario 1
Instead of purchasing a single $1,000,000+ dollar life insurance policy, you can layer multiple policies to save money and avoid being over-insured.
Breakdown of coverage length and amount for each policy:
- Policy 1: $500,000, 10-year term to cover your children until they reach adulthood
- Policy 2: $300,000, 20-year term to cover your mortgage
- Policy 3: $250,000, 30-year term to replace your income until your spouse reaches retirement
By layering these policies, for the first 10 years you will have over one million dollars in coverage. Then the amount of coverage will decrease as your insurance needs decrease.
Tip: You can save money by purchasing the policies all at once instead of waiting for when the needs arise. This is because your age and health play a significant role in determining your policy premium costs. The longer you wait, the older you get, and the chances of health issues appearing will increase.
You know that if one of you die prematurely, the other could afford a nice funeral and pay off any final expenses. However, you still owe $350,000 on your 20-year mortgage and there’s also the cost of raising two children.
For coverage, you mainly just want to ensure that your family can continue living in your home and your children get a good education.
Breakdown of coverage length and amount for each policy:
- Policy 1: $400,000, 20-year term to pay off the mortgage
- Policy 2: $150,000, 30-year term to provide for your children and their education
Once your mortgage is paid off, you could let the $400,000 policy expire leaving you with 10 years left of coverage on an additional policy, just in case.
Owning two separate policies instead of one $550,000 policy provides flexibility and affordability.
Policy 1: A permanent (whole) life insurance for your spouse
This policy would ensure your wife would have money in her retirement years to replace social security benefits, cover estate taxes, pay for funeral costs, and any other final expenses.
Policy 2: 20-year term for your business
To supplement the whole life policy, you could add a 20-year term life insurance policy that is structured to fund a buy-sell agreement. This policy would actually be owned by the business or the other owners of the business.
This policy would give the remaining business owners the funds to buy your share, which would allow the surviving owners to keep the business while your family still gets a payout.
Policy 3: 15-year term for your mortgage and children
In addition to the other two policies, you could also add a 15-year term policy to cover the remainder of your mortgage and both of your children’s education.
Now, why would you purchase three different policies here instead of just one?
With multiple policies in place, once your children are grown and you’re retired, you can let the term policies expire. Rest easy knowing you’re still on this side of the grass and that you have a permanent life policy locked in place to cover final expenses.
Owning additional term policies instead of a large permanent life policy for all those years would align better with your needs, be more affordable, and allow for different ownerships.
Owning Multiple Life Insurance Policies
In most 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. Meaning you’d pay an annual charge (a nominal $50 fee or similar) for each policy you own.
Also, each of your policies would be subjected to the insurance costs associated with policies within that band of coverage. The larger the policy, the lower the costs are per thousand of coverage—similar to there being discounts for buying in bulk.
» Compare: Term life insurance quotes
You can have multiple policies from different insurance companies.
Let’s say you purchased a $150,000, 20-year term policy from Life Insurance Company A before you had children. You now have a baby and want more coverage but found a better rate with Life Insurance Company B. You are free to apply to the second company and still keep your first policy.
Life insurance is very flexible and can be structured to fit your individual needs. If you are unsure what your coverage needs are or whether multiple policies would be in your best interest, contact Quotacy.
We’ll help you find the right coverage at the best possible price, whether you need one or multiple life insurance policies.
Knowing What to Know
We understand learning the ins and outs of life insurance can be tedious. To help you find additional information relevant to your situation, here are related articles that people like you found valuable.
- Life Insurance Buyer’s Guide
- Term vs Whole Life Insurance
- Why Life Insurance Companies Have Different Rates
- Insider Tips for Affordable Life Insurance
Note: Life insurance quotes used in this article are accurate as of August 13, 2020. These are only estimates and your life insurance cost may be higher or lower.
Watch the Buy Multiple Life Insurance Policies Video
Listen to the Buy Multiple Life Insurance Policies Transcript
Read the video transcript
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!
About the writer
Natasha Cornelius, CLU
Senior Editor and Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.
I have a reverse mortgage, ($350,000) and I want my daughter to be able to pay off the loan after I pass on. I have no insurance but I want multiple policies. Any suggestions?
Hi Pamela,
If you’re interested in buying multiple policies, we recommend contacting us directly to go over your different needs. One of the policies should have a face amount equal to the approximate value of your home.
As for the other policies, many factors play into what would make the most sense, for example your age, other debt you may have, and your income and additional assets. An advisor can help you make a plan that is best for your unique situation.
Is the any personal risk to the employee if a company want to take a COLI policy out on them? Would rates be higher or coverage offered be lowered by this?
Katie,
When a company takes out corporate owned life insurance (COLI) on their executives or even all employees, there isn’t an impact to the insurability for the employees. Any coverage the company owns is viewed as business coverage and doesn’t impact the amount of insurance the employee can receive personally.
Rates won’t be impacted for a personal policy either. Life insurance rates are determined from many criteria (including age, gender, smoking status, lifestyle, health, etc.) Rates are not determined based on whether or not a business owns insurance on the employee, and the amount of personal coverage is not impacted either.
If you have to separate life insurance policies with the same life insurance company will
There be to separate checks issued to the beneficiaries?
Hi Sandy,
Because the two different policies have two different policy numbers, it’s likely that the insurance company will send out two separate checks.
Purchasing multiple life insurance policies is a great strategy. It allows you to start where you can afford to start and to increase your total coverage over time. Don’t get stuck in a procrastination waiting for the perfect policy. Start with something and add more later. Great article.