Is It Beneficial to Have Different Life Insurance Policies?

There’s really no simple answer to the question, as it depends on why you might want different life insurance policies. If the aim is simply to maximize the amount your family will receive when you die, then you can certainly achieve that benefit. If you want to maximize the cover by taking out different types of insurance coverage, then it can be beneficial.

It’s fairly common to find someone taking out a term life policy that caters for short term needs early on, as well as a permanent life insurance policy for later needs. One drawback with having different life insurance policies through different insurers is that each insurer has the requirement that you must disclose information about all the other life insurance policies that you currently have whenever you apply for a new one.

When you apply to an insurance company for life insurance cover, and you disclose the details about another existing policy you have, the insurer won’t proceed as if the other policy doesn’t exist. They will underwrite your new policy through careful consideration of the benefits your dependants will receive in the event of your death. For this reason, purchasing two identical policies will not necessarily mean that your family will get twice the amount of life insurance.

You cannot simply multiply the number of policies in order to multiply the benefits in a direct way. It doesn’t quite work like that as there are many factors that the insurance underwriters will have to take into consideration.

It may be more beneficial to buy all your life insurance from one source

It is generally better to buy all the coverage you need from one source. That way, if you want different types of life insurance cover, each unit, so to speak, will cost you less with each new one you buy. Sourcing your policies from different insurers may help to safeguard you against one going under and you losing everything, but that doesn’t happen very often, and there are few if any other benefits that are really worth considering.

While there is no legal limit to the number of life insurance policies that someone can take out, there may be difficulties in actually being accepted a number of times, especially in a short time frame.

Applying for too many life insurance policies too quickly may get you rejected

The Medical Information Bureau receives the information submitted from each application for insurance. When someone makes an application for a new policy, the insurer will look for any prior information that may exist about that applicant in the Medical Information Bureau files. If someone applies for several life insurance policies in a relatively short period of time, they will get suspicious. This may cause delays with the application, which may even be declined as a result.

Taking out a term life insurance policy and a permanent life insurance policy at a time when you are getting married, starting a new family and buying a house, is probably a good idea. The type of policy will pay out more than most, and it is a good policy to have in place when there is a mortgage to pay and children to bring up with possibly college education fees to think about later as well. You can protect your loved ones adequately with this type of policy when there are many expenses to think about.

A term policy will expire in perhaps 25 to 30 years, but by that time you should have paid off your mortgage, and your children will most likely be independent with families of their own. This means you will no longer need the higher payout it offers, should you die. However, your permanent policy will still be in effect, and should be adequate to cover all needs when you die.

• About the Author

About Brian Greenberg

Brian is the CEO and Founder of True Blue Life Insurance. Brian is licensed to sell life, health, annuities, and property and casualty insurance in all 50 U.S. states. He is the author of The Salesman Who Doesn't Sell and is a member of the Million Dollar Round Table, an organization that consists of the top 1% of financial advisors worldwide.

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