Life insurance is all about making sure you’re covered, but life’s changes often mean one policy isn’t enough. Here’s the deal: you can have more than one life insurance policy, and it’s a smart move for many reasons. Think about how life throws curveballs. Maybe you’ve been through a divorce and remarriage. You’d still want to protect your first family financially if something happened to you, right? That’s where one policy comes in. But what about your new partner? You’d probably want them covered, too, so getting an additional policy makes sense.
Then there’s family growth. Grandkids enter the picture, and suddenly, you want to leave something for them too. The policy you got years ago might not reflect these new additions to your family. Don’t forget about work benefits. Many of us have life insurance through our jobs, but these can be pretty limited. If you’re aiming for more comprehensive coverage, or if you lose your job, having your own policy is a game changer. We look into why additional life insurance can be advantageous, depending on your life circumstances and coverage aspirations.
More Comprehensive Coverage
When you have multiple life insurance policies, you can achieve a higher total death benefit. This is especially important if you have significant financial responsibilities, like a large mortgage or business debts, or if you wish to leave a substantial inheritance to your family. The combined coverage from multiple policies ensures that your beneficiaries have sufficient funds to handle these financial obligations or to maintain their standard of living. This approach can be particularly valuable for business owners or professionals with fluctuating income levels. Multiple policies allow them to increase coverage during peak earning years to protect their business interests and family lifestyle.
Flexibility
Multiple policies allow you to adapt your life insurance as your needs change. For instance, you might start with a basic term life policy when you’re younger and add a whole life policy later for long-term savings and death benefits. This flexibility means you’re not locked into one policy or coverage amount for life. Flexibility in life insurance isn’t just about coverage amounts. It can also mean varying the types of insurance, like combining term and whole-life policies. This mix can provide both long-term security and short-term affordability. Use this flexibility to align your insurance with your financial life stages. For instance, a term policy could cover the years when your children are dependent, while a whole life policy could focus on legacy planning.
Added Guaranteed Insurability
Some life insurance policies come with a feature known as “guaranteed insurability,” allowing you to increase your coverage without undergoing another medical exam. This is particularly beneficial if your health has declined since you first took out the policy, as it ensures you can still obtain additional coverage without the risk of higher premiums or denial. Companies like the Canada Protection Plan (CPP) provide no medical life insurance to broaden your options. This feature is particularly beneficial if your occupation or hobbies put you at higher risk over time. It allows you to maintain or increase coverage without the risk of being denied due to these increased risks. If you foresee significant life changes, like starting a risky venture or a health-related concern, securing a policy with guaranteed insurability can be a strategic move.
Laddering Term Life Insurance Policies
Laddering involves having several term life insurance policies with different expiration dates. This strategy can be aligned with your financial obligations, such as a 20-year term policy for a mortgage and a 10-year policy for your child’s college education. As each financial obligation is met, the corresponding policy expires, which can result in lower overall insurance costs since you’re not paying for unnecessary coverage. Laddering can align with significant milestones like paying off a mortgage, children’s education, or retirement. As each financial responsibility decreases or ends, so does the corresponding policy, reducing unnecessary coverage and costs.
If you’re considering multiple life insurance policies, it’s important to go in with your eyes open. Typically, insurers will assess your applications based on various factors like health and lifestyle, so it’s not guaranteed that you’ll be approved for every policy you apply for. They will also closely examine any existing coverage you have. This is to make sure that any new policy you’re considering doesn’t exceed what’s known as your insurability limit, usually around 20 to 30 times your annual income. This limit is in place to strike a balance between your insurance needs and what’s financially realistic. It’s not just about getting approved for additional policies; it’s about making sure that the total coverage you seek aligns with your actual financial situation. Premiums for these policies shouldn’t overstretch your finances. Remember, life insurance is about securing peace of mind, not adding financial stress.
