Can You Have More Than One Life Insurance Policy?

You typically have only one insurance policy for your car or your home, but is that also true for life insurance? Can you have more than one life insurance policy? Well, the short answer is yes. In fact, it's not uncommon for people to have multiple life insurance policies. 

Life insurance plays a critical role in financial planning that can change over time, and there are multiple ways to structure a policy. That leads many people to use multiple policies for different facets of their financial plan or as their needs change or grow over time. 

Here are some of the reasons you may have more than one life insurance policy. 

Common reasons to have more than one life insurance policy 

To add coverage beyond your existing work life insurance 

In many cases, it makes sense to pair your life insurance offered through work with a policy you bought on your own. If you’re offered insurance through work, it can be a great benefit. It's often paid by your company, or the cost is relatively inexpensive. In addition, you typically don’t need any kind of health screening to get coverage, as you would with private insurance. 

But insurance through work often isn’t enough coverage for most people (e.g., $50,000 or a multiple of your salary). Additionally, it’s almost always term life insurance, which means it offers only a death benefit. Finally, in most cases, if you leave your job, you will lose the life insurance provided by your employer. For this reason, many people choose to buy private life insurance in addition to their workplace policy, so they always have some coverage even if their job changes. 

You have different needs that can’t be met by one type of policy 

Even when you buy private life insurance, it’s common to have multiple policies to cover different death benefit needs. People also frequently use a mix of term and permanent life insurance to balance the lower costs of term while also reaping the additional, long-term benefits of a permanent life insurance policy. 

With term insurance you can get the same death benefit as a permanent policy, but at a lower cost. However, a permanent policy will accumulate cash value that grows in a tax-advantaged way and is accessible throughout your life. In addition, permanent life insurance never expires (a term policy does). So long as you pay the premiums to keep the policy going, it will pay a death benefit someday. 

Your coverage needs grow over time 

When you’re young and starting a family, you may have a large death benefit need — and a tight budget. That makes term life insurance a good fit. But over time, as your income rises and your family grows, you may find yourself in a position in which it makes sense to add permanent insurance. In many cases, people convert some of their term insurance into permanent policies over time in order to get the added benefits of permanent insurance. This can result in owning multiple life insurance policies. 

If you’re a business owner, the thinking is the same. As your business grows, you may find you have additional needs for life insurance to protect your growing enterprise. 

Limits on the amount of insurance that you can get 

While there’s technically no limit on the number of life insurance policies you can have, there is a limit to how much life insurance you can get — in total. Typically, the limit is based on your income and earning potential, which is what the insurance is meant to replace if you were not here tomorrow. There may be more complex uses as well, including for a business or estate planning need. 

When to consider additional life insurance 

Often, the arrival of different life milestones may prompt you to reassess or increase your need for life insurance. These could include getting married, having kids, buying a home, supporting aging parents and more. 

A financial advisor can help you review your financial needs and recommend the best strategy for adding life insurance to your financial plan. Then he or she can work with you throughout your life to continue to update your insurance as well as the rest of your financial plan as your needs change over time.