A guide to owning more than one life insurance policy

Let’s face it, the future is unknown and unpredictable. And change can happen in the blink of an eye. Luckily, life insurance can bring some peace of mind—at least for certain financial risks. For example, life insurance can provide money to help replace a lost income if someone dies, or money to pay off your home's remaining mortgage.

Since a life insurance policy can be structured to address a certain need or risk, a common question that people ask is, can one acquire several life insurance policies (to cover different risks)?

The quick answer to this is yes, you can purchase multiple forms of life insurance policies all at once or separately. This strategy enables you to cover various facets of life’s risks and has the benefit of enabling cancellation of one policy without affecting another.

Why take out several life insurance covers?

For starters, life insurance takes numerous shapes all meant to offer protection against various risks that could affect you. Whether you need assurance that your home will be paid for in case you pass away before finishing paying for your mortgage or want your family to receive regular financial help after you’re gone, life insurance can help.

For example, it’s not uncommon for individuals to take out both mortgage and income protection policies concurrently. Your most suitable combination depends on your individual needs and the risks you want covered.

Must you take multiple insurance policies simultaneously?

Of course not. You have the liberty to decide the number of insurance policies that cover your life’s risks at any given point in time.

For instance, if you’re yet to buy a home but do have dependents, income protection may be a priority necessary to protect any dependents. Later, if you buy a home with a mortgage, a term life policy matching the mortgage might be beneficial.

While it’s not compulsory to purchase several insurance policies concurrently, there may be a significant benefit in doing so. And some providers offer good discounts on premiums to applicants who bundle together multiple policies.

The bottom line here is to carefully assess your life’s risks and how they impact your beneficiaries. With that, you’re able to decide appropriate covers for your situation.

How do multiple life insurance policies work?

Once you’ve decided that you need multiple life insurance policies, your next big question is probably on how they work. Here’s a brief explanation:

First, and as is the case with all other insurance applications, you need to be honest when revealing the nature and other specifics of your status quo. Providing accurate facts allows your insurer to correctly assess your life’s risks and ultimately offer you a suitable cover.

Secondly, irrespective of the number of life insurance policies you take, it’s worth noting that each operates independently. You pay the monthly premiums for each policy separately. Also, in the case of term-based policies, each expires at its rate as directed by the contractual terms.

Thirdly, life insurance policies might reduce payout amounts as they age. Adding other policies to run concurrently to it doesn’t affect its reduction rate.

Finally, should you pass away during the term, your beneficiaries can claim simultaneously the sum assured by the valid policies. However, if your policies are with multiple insurers, they have to file claims separately for each policy.

Types of life insurance policies purchasable simultaneously

Not sure which life insurance types to combine? The following are a few you may consider when looking to cover multiple risks:

Over 50s plans

This policy provides an excellent cover for people who are between the ages of 50 and 80 with an underlying medical problem. It covers the financial costs associated with funerals and successions of inheritance.

Family income benefit

Also known as family income protection, this policy provides the financial assistance that your family gets from your monthly income when you depart. It would help your dependents pay for household living expenses after you pass away.

Level term life insurance

This cover offers a lump sum payout e.g. to a spouse or children whose parents suddenly pass away.

Increasing term life insurance

With this policy, you get cover that takes inflation into account. Because your cover amount will rise with inflation, your monthly payments can therefore go up. Providers may peg the rises to a certain fixed % (e.g. 3% or 5%) or to a measure of real inflation such as the Consumer Price Index (CPI) to determine inflation each year and adjust policies in line with these changes.

Decreasing term life insurance

Decreasing term life insurance may be suitable to help cover the repayment of any balance on your mortgage when you pass away. Its sum assured reduces over time (e.g. as the mortgage balance decreases).

The whole of life insurance

This policy offers cover to your beneficiaries irrespective of the occurrence time of risk. This type of cover tends to be more expensive, because the company is sure they'll have to pay out at some point (so long as the policyholder keeps up their premium payments).