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Purchasing Multiple Life Insurance Policies

July 24, 2018
Our goal is to educate and advise on life insurance options, so you can feel confident in making the right choice, whether that’s through Quotacy or somewhere else. To ensure we provide accurate and trustworthy information, our writers follow strict editorial standards.

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.

Example:

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:

  1. Mortgage for your home
  2. 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.

See what you’d pay for life insurance

Comparison shop prices on custom coverage amounts from the nation’s top carriers with Quotacy.

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:

  1. The insurance company would be cautious as to why someone with no spouse or children would want to insure themselves with that much coverage.
  2. 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: How much coverage do I need?

Let’s go over three scenarios in which laddering life insurance policies may be a good idea.

Scenario 1

You want life insurance coverage to ensure your children will have money for college, your mortgage will be paid, and to provide income replacement for your spouse in case you die prematurely.

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.

Scenario 2

You and your spouse have well-paying, steady jobs, a generous savings and retirement portfolio, and two young children under the age of 5.

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.

Scenario 3

You are a husband, a father, a business owner, and plan on retiring in 20 years. Right now, you have 15 years left on your mortgage and two children, ages 10 and 15. Here’s a policy laddering strategy you would want to consider.

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.

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

7 Comments

  1. Pamela Caron

    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?

    Reply
    • Natasha Cornelius

      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.

      Reply
  2. Katie Juneau

    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?

    Reply
    • Jeremy Hallett

      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.

      Reply
  3. Sandy Bsker

    If you have to separate life insurance policies with the same life insurance company will
    There be to separate checks issued to the beneficiaries?

    Reply
    • Natasha Cornelius

      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.

      Reply
  4. Dane LaVigne

    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.

    Reply

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