It's Life Insurance Awareness Month: Does it Make Sense to Have Multiple Life Insurance Policies?

Did you know that September is Life Insurance Awareness Month? And though life insurance is important to discuss at any time of the year, some features of life insurance go beyond standard conversations.

For example, did you know that you can have multiple life insurance policies at once? One policy is often enough, but that may not always be the case. You should periodically review the purpose of your insurance - which expenses it is meant to cover - and any life changes that may have increased or decreased that need.

This information is designed to provide scenarios where multiple policies could be beneficial and is not designed to supplement personal advice. Always talk with your financial advisor to determine your personal need for insurance. 

When Would You Purchase Multiple Life Insurance Policies?

Life insurance is most often designed to provide supplemental income to beneficiaries in the unfortunate event of a plan holder’s passing. However, a single policy may not be enough to cover all of the expenses of a family. 

Purchasing a second life insurance policy is an option for those that wish for additional coverage. Greater protection for loved ones is the largest benefit to this approach, though paying for multiple policies can be expensive. Here are some situations that may call for the purchasing of a second life insurance policy. 

Lifestyle Changes

The birth of a child, changes in employment or a new relationship are all examples of life changes we may think of when considering greater coverage. But another factor to consider is personal lifestyle changes, especially those that involve your health – If you’ve made healthy changes, then a new policy may cost less than before.¹ As situations change, so do the monetary needs of those around you. Consider this when examining the needs for life insurance. 

Asset Accrual

Some financial goals will require long-term payment plans. Assets like cars and homes can take a while to pay off, increasing your monthly expenses by a specific amount for a given period.

Depending on your situation, a second life insurance policy can help account for these added expenses, providing additional insurance for a shorter period to help offset the added cost until assets are paid off.

Often, these policies are set to different terms and typically referred to as laddering term life insurance.² 

Tracking Policies

Multiple plans may provide more coverage, but be sure to keep track of each policy and costs. Premiums alone are expensive. Though, according to the National Association of Insurance Commissioners, over one billion dollars of life insurance benefits goes unclaimed, as beneficiaries are unable to locate their loved one’s policy.⁴

Be sure to communicate with your advisor about your policies, so that they can keep notes for your heirs. It may be difficult to have conversations like this with your family, but it is worthwhile. You can start by letting them know where your legal documents are located. Consider attaching a note with important information, like how to reach your financial advisor and other important contacts. It is difficult enough to lose a loved one; putting the pieces together without instructions while in an emotional state is near impossible. Many people who have gone through such an ordeal with their own parents want to make sure their kids are more prepared. Talk with your advisor if you're not sure where to start.