Can You Have More Than One Life Insurance Policy?

Life insurance isn’t one-size-fits-all. We all have different life insurance needs and reasons to buy it. Sometimes, trying to meet all your needs with one policy is tricky. Thankfully, you can have more than one life insurance policy.

Buying more than one life insurance policy is a great way to ensure all your needs are covered while saving money in the long run. Keep reading to find the best way to layer multiple life insurance policies.

Table of Contents

• How Many Life Insurance Policies Can You Have?
• Reasons to Own Multiple Life Insurance Policies
• Owning Group Life Insurance and Personal Life Insurance
• Laddering Life Insurance Policies
• Supplementing Term With Permanent
• Assessing Your Coverage Needs

How Many Life Insurance Policies Can You Have?

Technically, you can have as many life insurance policies as you want.

• You can own more than one term life insurance policy.
• You can own more than one permanent life insurance policy.
• You can mix and match different types of life insurance policies.
• You can own life insurance policies from various insurance companies.

What’s the catch? Sure, you can have as many policies as you want, but you can only have up to a certain amount of total coverage.

While there is no cap on the number of policies you’re allowed to own, there are limitations on the total amount ($) of coverage you can have.

If you want to own 10 life insurance policies with face amounts of $100,000 each, you can. But that seems overly complicated and unmanageable. We don’t recommend it.

But owning 2-3 policies at one time or overlapping policies can be very beneficial in certain situations.

If you have various reasons for buying life insurance, buying more than one policy to cover different needs can save you money.

Reasons to Own Multiple Life Insurance Policies

There are many reasons why you may need life insurance. Common motivations include:

• Income replacement of your salary
• Financial protection for a dependent spouse/partner
• Financial protection for your children as they grow
• Financial protection for dependents with special needs
• Provide funds to cover debt
• Provide funds for end-of-life expenses (e.g., medical bills, funeral costs)
• Liquidity needs for estate settlement and taxes
• To build cash value
• Funds for business needs (e.g., loan collateral, buy-sell funding)

Wondering when to buy? Read our guide: When Should I Get Life Insurance?

If you need life insurance for one or more reasons, buying one policy to cover all needs may not be the right strategy. Why? The cost could be prohibitive in the long run.

For example, let’s say you and your spouse have three children, one of which has special needs and will financially rely on you his entire life. You also have a 30-year mortgage you’re slowly paying off.

Consider these two hypothetical buying options:

Option 1

• Buy one $500,000 guaranteed universal life insurance policy

• • Monthly cost of $361.58 for a healthy 40-year-old male
  • Provides financial protection that can pay off the mortgage and help the surviving spouse with the costs of providing for children
  • Pays out no matter when you die

Option 2

• Buy a 30-year $250,000 term life insurance policy

• • Monthly cost of $28.11 for a healthy 40-year-old male
  • Provides financial protection to pay off the mortgage should you die during the 30-year term

• Buy a $250,000 guaranteed universal life insurance policy

• • Monthly cost of $180.81 for a healthy 40-year-old male
  • Provides money for surviving spouse to help with the costs of providing for your child with special needs
  • Pays out no matter when you die

With the first option, you’ll have a large amount of coverage for your entire life. But you’ll pay high premiums for this protection.

With the second option, you’ll have a large amount of coverage for 30 years. Then the term policy expires, and, ideally, your mortgage is paid off by then. After, you’re left with the remaining $250,000 permanent policy that provides financial protection for the lifelong needs of your child.

You may be wondering, “Shouldn’t I buy the large permanent policy to leave my family with more money?” If you can comfortably afford the premiums, sure. A sizeable permanent policy can be very beneficial.

However, an expensive permanent policy isn’t affordable long-term for most families. In addition, you can typically get more bang for your buck if you invest your money instead.

When Is Owning More Than One Policy a Good Idea?

There are three common scenarios in which people own more than one policy:

1. You own an employer-provided life insurance policy and a personal life insurance policy.
2. You’re laddering various life insurance policies.
3. You’re supplementing a term policy with a permanent policy.

These strategies can save you money in the long run. Let’s find out how.

Supplementing Employer-Provided Life Insurance

Owning a personal policy is always a good idea, even if your employer offers life insurance.

Group coverage is a nice benefit, but it’s usually a small amount and ends if you leave your job.

Group life insurance is never a guarantee. Employers can change benefits programs at any time.

Don’t wait to get a personal life insurance policy. You could become uninsurable or develop a medical condition rendering a personal policy unaffordable.

It’s recommended that you buy a personal life insurance policy in addition to your group life insurance policy because:

• You own an individual policy. Your employer controls a group policy.
• Your personal policy follows you. If you leave the company, your group coverage likely ends.
• Your individual premiums don’t increase as you age. Group premiums do.

Laddering Life Insurance Policies

Laddering policies is when you buy separate policies to cover different needs. It’s a smart way to reduce costs without compromising value.

Two common laddering strategies:

• Stacking policies on top of each other that have varying lengths of coverage.
• Buying policies at different stages of your life so coverage overlaps.

Example of Laddering Policies at the Same Time

You’re 35, married, and have two children. You want life insurance coverage to ensure your children can go to college, the mortgage is covered, and provide income replacement for your spouse should you die unexpectedly.

Instead of purchasing a single $1,000,000+ 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: $750,000, 10-year term to cover your children until they reach adulthood
  • • Monthly cost = $17.17
• Policy 2: $500,000, 20-year term to cover your mortgage and daily expenses
  • • Monthly cost = $21.22
• Policy 3: $250,000, 30-year term to replace your income until your spouse reaches retirement
  • • Monthly cost = $21.82

By layering these policies, for the first 10 years, you will have $1,500,000 in coverage. Then the amount of coverage will decrease as your insurance needs decrease.

Instead, you could buy a 30-year $1,500,000 that costs $89.45 per month. But you’d save money by laddering.

*Rates shown are for a healthy, non-smoking male.

Example of Overlapping Coverage

You get married and rent a house with your spouse. As 28-year-old newlyweds, your budget is tight and you rely on both paychecks to pay bills.

You each purchase inexpensive 20-year $250,000 term policies. As you’re working towards building a life together, this coverage provides financial protection should either of you die suddenly.

Ten years later, your family has grown to a family of four. You’ve also purchased a larger home.

You both decide you need more life insurance since you have more financial responsibilities. You each buy a 20-year $500,000 term policy.

Breakdown of coverage length and amount for each policy*:

• From ages 28-38, you each own $250,000 of life insurance coverage, paying $12.21 monthly.
• From ages 38-48, you each own $750,000 of life insurance coverage, paying a total of $36.91 monthly.
• At age 48, the $250,000 policies expire. You’re both left with $500,000 in coverage (paying $24.70 per month since the first policy dropped off) that will financially protect your family for another ten years.

Overlapping policies help keep costs minimal while also covering different financial obligations throughout your life.

*Rates shown are for a healthy, non-smoking male.

Supplementing a Term Policy with Permanent

The primary reason for life insurance is to replace your income so your loved ones can continue their standard of living without financial struggle. Many significant financial obligations are temporary, like a mortgage or raising children. Because they don’t last forever, term life insurance is typically the best option for families.

Term life insurance is customizable and can fit into most budgets. However, one strategy that works great if it’s affordable for you is to buy a term life insurance policy with enough coverage to protect your big expenses and then purchase a small permanent life insurance policy to supplement it.

A small permanent policy can help your family with end-of-life expenses and provide long-term peace of mind.

Example of Supplementing Term with Perm

Anna is 30 years old. She works hard and contributes 6% of every paycheck to her 401(k).

At 32, Anna gets married. She and her husband each purchase a $500,000 30-year term life insurance policy naming one another primary beneficiaries. Her premiums are $30 per month.

At 33, she and her husband also each purchase a $50,000 whole life insurance policy naming one another primary beneficiaries. Her premiums are $51 per month.

When Anna is 34, they have their first child.

At 35, Anna and her husband buy their first home. In this same year, she’s promoted and receives a raise. She also opens an IRA account and contributes $200 each month.

When Anna is 36, they have their second child.

At 53 years old, Anna’s $50,000 whole life insurance policy has a cash value of $12,221. If she desired, Anna could access these funds via policy loans.

At age 55, Anna and her husband are officially empty nesters.

At age 60, she and her husband send in their last mortgage payment.

At age 62, their term life insurance policies end. Their whole life insurance policies are still active.

At age 67, Anna retires.

Policy cost breakdown:

• Age 32 – Anna buys a $500,000 20-year term policy for $30 monthly.
• Age 33 – Anna buys a $50,000 whole life policy for $51 monthly.
• Age 62 – Anna’s term policy expires. Her whole life policy coverage continues.

Pros & Cons of Owning Multiple Policies

Like anything else, owning multiple life insurance policies has advantages and disadvantages. On the one hand, you can save money. On the other hand, each comes with an annual fee called a fixed policy charge (usually around fifty dollars).

More importantly, each policy is subject to the insurance costs associated with that band of coverage. The more comprehensive the coverage, the lower the cost—similar to discounts for buying in bulk. So, by opting for multiple small-scope policies versus one large one, you could miss out on a band discount.

Pros:

• You can save money in the long run
• You can rest easy knowing all of your insurance needs have adequate coverage

Cons:

• You pay annual fees for every policy you own
• There are more details and accounts to manage
• You may miss out on “bulk” discounts

Our quoting tool automatically includes all policy fees and band discounts in the calculations. Compare rates for multiple policies and explore how much you can save by laddering.

Assessing Your Coverage Needs

The right amount of life insurance is different for everyone. Your family, finances, and goals all play a role in determining how much you buy.

Term Life Insurance

Term life insurance is straightforward and affordable financial protection for the people you care about.

Coverage length can last from 10-40 years. We advise choosing a term that matches your longest financial responsibility or the longest you can afford.

The coverage amount should be able to replace your income so your family can continue their same standard of living even if you were to die unexpectedly.

Many term policies allow you to convert your policy into a permanent one if you later realize you need lifelong coverage. This option can be beneficial if you become disabled or are diagnosed with a chronic illness and need to extend your policy but are no longer insurable.

If you aren’t sure how much coverage you need, our free life insurance calculator can help.

Permanent Life Insurance

Permanent life insurance needs are often much different from term life insurance.

Typically, people use it for:

• Business needs
• Estate planning
• Inheritance planning

Life insurance needs are highest in your prime earning years. For example, anywhere between the ages of 25-65 when you’re working hard in your career, building a family, and saving for retirement.

During these years, your death is more likely to create financial devastation for your loved ones if you die unexpectedly. It’s why term life insurance is ideal since it’s temporary and can be structured to provide coverage for these vital years.

Your life insurance needs may extend these prime earning years which is when permanent life insurance is needed. A small permanent policy can be a great supplement to a larger term one.

Unsure if you have permanent life insurance needs? Read this post to learn more: Is Permanent Life Insurance a Bad Idea?

Easily Compare Life Insurance Quotes From Top-Tier Carriers

Ready to protect what matters most? Get a quote, apply online, and then talk with your dedicated Quotacy agent about it. Your agent is not commission based and, therefore, is unbiased as to how much life insurance you ultimately purchase. Your agent can provide advice as to how much life insurance you need and whether or not multiple policies is the best strategy.

At Quotacy, we’ve worked with thousands of families of every type to find the best possible coverage for their family’s goals. We can help you too.

Note: Life insurance quotes used in this article are accurate as of April 12, 2023. These are only estimates and your life insurance costs may be higher or lower.

Watch the Buy Multiple Life Insurance Policies Video