In this article, we'll explain everything you need to know about having more than one life insurance policy. We'll share our top ten reasons why having more extra life insurance policies might be a good option, but also some disadvantages too. We'll also show you alternative ways to boost your life insurance cover and answer your frequently asked questions.
The short answer to this question is 'yes'. You can have more than one life insurance policy. In fact, there are many reasons why you might want to take out multiple life insurance policies.
Research by Direct Line found that 35% of people in the UK currently hold a life insurance policy.
Life insurance is a great way to continue supporting your loved ones after you pass away. It delivers a wide range of benefits, including:
You can find out much more about life insurance in this comprehensive article from MyTribe.
Getting one life insurance policy should be at the top of your to-do list, but what about two life insurance policies (or more)?
There is no legal limit to the number of life insurance policies you can purchase or hold at any one time.
Let's look at the different types of policies you can combine to create a life insurance portfolio that matches your needs.
Term and whole of life are two different types of life insurance policies. If you're creating a portfolio of life insurance policies, it's important to know the differences.
You're welcome to have as many life insurance policies as you wish, including both term and whole of life policies.
When you take out a life insurance policy, you can choose how much cover you want. With more than one policy, you can select a different cover amount for each one, boosting your overall cover level. For example:
If you have multiple life insurance policies, you can include extra cover features in each one. For example:
Not all insurance providers offer the same add-ons, so it can make sense to take out more than one life insurance policy and get the cover you want.
As with life insurance policies, there's no limit to the number of insurance companies you can use. For example, you could have a term life insurance policy with one provider and a whole of life policy with a different provider.
However, if you use more than one provider for your life insurance, you have to pay separate monthly premiums to each insurance provider. There may also be extra admin for your beneficiaries when it's time to make a claim.
Of course, there's nothing stopping you from taking out multiple life insurance policies with the same insurer.
Now you know what you can do with multiple life insurance policies, let's look at the benefits.
Let's look at 10 reasons why getting an additional life insurance policy might deliver benefits.
Covering your mortgage is one of the main reasons people buy life insurance. However, the amount you owe your mortgage provider (and the amount of life cover you need to maintain it) changes too.
For example, you might have taken out life insurance in your twenties when you bought your first property. However, as you grow older, you might move to a bigger house with a larger mortgage, and you need a larger amount of life insurance cover to ensure your loved ones can pay the mortgage if you pass away.
In this example, it would be unwise to cancel your existing life insurance policy, as it will be priced based on a time when you were young, healthy and at a far lower risk of death. So, adding a new policy for the extra cover could be the best option.
Insurance providers use a combination of several factors to calculate life insurance premiums, including:
If you change your lifestyle (for example, you quit smoking), you might be able to get cost effective life insurance by taking out a new policy.
27% of life insurance policyholders in the UK have it through a scheme with their employer. (Source: Forbes)
Many employers offer life insurance as a perk for their employees. It's often called a death-in-service benefit.
However, if you find that the death-in-service cover your employer offers isn't enough to meet your needs, you should explore taking out an additional life insurance policy.
Also, life insurance through your employer is only valid while you're employed by that company. If you're thinking of changing jobs and your new company doesn't offer life insurance for employees, you should look at an additional policy.
28% of life insurance policyholders in the UK have a joint life insurance policy. (Source: Forbes Advisor)
A joint life insurance policy is when two partners take out a life insurance policy together. A joint policy only pays out once, to the surviving partner when the first partner passes away. After that, the joint policy automatically expires.
You may already have a life insurance policy in place, but you've just got married or had a child with your partner, and you decide that you both need life insurance. A new joint life insurance policy may be the way to go.
Alternatively, you may have split up with your partner who you had a joint policy with. In this case, it's worth investigating a single life insurance policy where you can nominate your own beneficiaries.
Research by Forbes Advisor revealed people buy life insurance for a wide range of reasons. Of current UK life insurance policyholders:
As you go through your life, your circumstances change - and your life insurance requirements change too.
In many cases, if you need to add extra cover, insure yourself against critical illnesses or add new beneficiaries to your life insurance, it can make sense to take out multiple insurance policies. That way, you have greater control of your life insurance and the level of support you can provide if you pass away.
Many business owners take out life insurance to protect their company if the worst should happen and they (or a business partner) pass away.
This is important if your business relies on you (or other key members of staff) to function, or if you have outstanding business loans.
However, it can be wise to keep your business life insurance policy separate from your personal policy, if you have one. In this example, it's best to take out two life insurance policies and pay separate monthly premiums for both.
Many life insurance providers will let you make changes to your life insurance policy. They'll allow you to add additional cover or extra features (such as critical illness cover). They may allow you to change your beneficiaries if you wish.
However, not all insurers are as accommodating, particularly if you want to remove something rather than add it. In addition, if your existing life insurance policy is written in trust (see Reason 9), it may not be possible to make changes. Or, they might want to charge you to make changes.
In this situation, you may have no choice but to take out new life insurance cover.
Life insurance is a marketplace where a large number of providers compete to win new customers by offering great deals.
It's certainly possible that, even though you already have an existing policy, you notice a deal that's too good to miss. Perhaps you see an advert, or discover something while browsing on a price comparison website, promising lower monthly premiums for how much life insurance you need.
You can then decide if it's cost-effective to get another life insurance policy to protect your loved ones even better if you pass away.
Ordinarily, the payout on your life insurance is considered part of your estate when you pass away. That means it's liable for inheritance tax at 40%.
However, an effective way to minimise this liability and enable your beneficiaries to inherit more money is to get your life insurance policy written in trust. When you do this, your payout is not considered part of your estate and doesn't count towards your inheritance tax allowance.
If you have an existing life insurance policy, perhaps one you took out when you were much younger or one from an employer, it may be worth purchasing a new one and getting it written in trust.
Organising your estate can be complicated, so it's always advisable to speak to a solicitor or financial advisor before you make your purchase.
If you have a term life insurance policy, what will you do when your policy ends? You could get another policy with the same insurer to cover you, but seeing as you're much older than you were when you purchased your current policy, it's likely to cost a lot more. If you've experienced any health issues during that time, it could be much more expensive.
Instead, you could investigate purchasing a new policy a couple of years before your current policy ends. While you may have to pay two sets of premium payments for a while, it may give you the coverage you need at a more cost effective price in the long run.
Just because you can have more than one life insurance policy, doesn't always mean it's the best option. There are a few reasons why having multiple life insurance policies can cause problems. Here are two of them:
The cheapest time to buy life insurance is always yesterday. If that's not possible, it's today. Because you're older when you apply for it, you're less likely to get as good a premium-to-coverage ratio for your second life insurance policy as you did for your first.
If you have more than one life insurance policy, it creates more work for your loved ones to do if you pass away. They'll have to make multiple claims, possibly dealing with multiple insurance companies. They'll have to monitor the claim process and deal with solicitors to make sure it complies with any relevant tax rules.
Dealing with death is a stressful time for everybody. Before you take out an extra life insurance policy, consider whether it's worth it for the people most special to you.
If you decide that taking out another life insurance policy is not the best route for you, you can try to amend your current policy to fit your requirements. Here are some of the things you can alter:
Remember that life insurance is a marketplace, and your insurer does not want you to take a second policy out with a competitor. As long as what you ask is reasonable, they're likely to accommodate your demands.
Talk to life insurance experts - Before you make your choice, it’s always best to talk to someone with an in-depth knowledge of the life insurance marketplace. A life insurance broker will be able to match the right policy with your goals, give you a tailored quote or quotes and may even be able to get a better price.
Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.
Mike is a personal finance copywriter who has written for numerous financial services publications and websites over many years.
There is no legal limit to the number of life insurance policies you can have. Many people have more than one policy as they find it suits their needs better.
There's no reason why you can't have more than one life insurance policy with one insurer. However, if you speak to your current insurer, they may be able to alter your existing policy to suit your requirements.
Yes. In fact, many people prefer to have separate life insurance policies as a joint policy pays out when the first partner passes away. After that, the surviving partner is no longer insured.
