It is estimated that around twenty million people in the UK have some kind of life insurance – which is excellent. Having a coverage policy on your life instils you with a great sense of confidence and calmness that in case something happens to you – your family is taken care of financially.
With that in mind, we wanted to ponder the question – is it possible to own more than one life insurance policy? If having one of them is a good decision, could having multiple ones be even better?
If that’s something that might interest you – stick around for a few more moments. To answer those questions, we’re going to go over some of the main life insurance policies, talk about some of them, and finally figure out – is it possible, and should you own more than one?
Types Of Life Insurance Policies
As you are probably aware, there are several life insurance policies that you can take out.
The main ones are:
- Term life insurance
- Whole life insurance
- Joint life insurance
- Over 50s life cover
- Critical illness cover
- Terminal illness cover
- Children’s cover
As it’s obvious by the names, all of these serve different purposes and are much better suited to a particular time in your life.
Here are a few words about the ones most often taken out.
Term Life Insurance
As the name suggests, a term life insurance coverage policy is the one you would agree upon over a set period of time, for example, 10, 20, or 30 years. Unlike some other policies, this one is often taken out as a security blanket for some of your loans or other financial obligations.
Essentially, you would take out a term life policy if you have ten years left on your mortgage, and you want to make sure you settle that debt no matter what.
Naturally, this is not the sole reason why some people take it out. Some simply want to enjoy the level of financial security these offer.
Now, before you go out and buy one of these, it might be advisable that you understand the differences between the three main kinds of term life coverage policies. Those are:
- Decreasing term
- Level term
- Increasing term
As you can tell by the name, the decreasing term coverage will decrease the amount of the final benefit or payout over time. Policies structured like this are often the ones taken out for debt consolidation.
Level terms should be avoided, if possible because they don’t account for yearly inflation. If you’ve taken out a 30-year policy worth a million pounds, assuming the average inflation rate (2.51%) in the UK stays the same, your million-pound policy would be worth around 475k when adjusted for inflation.
The increasing term sounds best, on paper, because your benefit grows over time, adjusting both for inflation and increased expenses over the years (in case you have kids, buy a house etc.). However, that also means your premiums will go up.
With all of that in mind, which one would you go now to buy?
Whole Life Insurance
The whole life insurance policy is pretty self-explanatory. It is a policy that covers you for your whole life. You come to terms with your insurance provider that you will pay them a fixed or adjusted monthly fee for as long as you’re alive, and in the event of your death, the beneficiary, in this case, your family, receives the payout.
Compared to term life, a whole life policy is usually significantly more expensive when compared against the same payout. How? Well, you’re paying longer for it.
However, this does come with some benefits.
One of the benefits that come from taking out a whole life insurance policy is the ability to borrow money against the value of your insurance policy – something you can’t do with term life coverage.
Joint Life Insurance
A joint life insurance policy is for couples. It is essentially a whole life policy that insures two people at the same time but pays out the benefit in case any of them passes away.
It is a decent option for couples that don’t want to deal with separate life policies and separate premiums each month. Cost-wise, it’s pretty much identical to having two separate whole life policies. However, there is a caveat.
As soon as one of the individuals passes away – the other one losses their coverage. So, is hassle-free monthly payment enough to make up for this? That’s up to you.
Is It Possible To Take Out More Than One Policy?
Now that we’ve gotten familiar with three of the most commonly taken out policies, it’s time to answer the question – is it possible to take out more than one policy?
It is entirely possible for you to take out more than one insurance policy. In fact, there is nothing stopping you from taking out dozens of policies at the same time. You could take out a term life, a whole life, and a joint policy at the same time, and then add more of them over the years if you wanted to.
But, do you really need to do that?
Should You Take Out More Than One Policy?
Generally speaking, there is no need for you to take out more than one policy at the same time. These policies and their conditions are based on the information you’re providing at the time, and as a general rule of thumb – the younger and healthier you are, the better the deal will be.
With that in mind, it would be kind of ludicrous to get another coverage plan ten years down the road when you’re older and presumably less healthy, right?
Well, to a certain extent.
For example, if you’ve stopped smoking or drinking, or you had recovered from an illness you had when you took out the first policy, searching for a new and improved deal might be worth your while. You might just ace the medical exam this time around, resulting in lower premiums and higher benefits, so it really depends on the situation.
As you can see, it is more than possible for anyone to have multiple insurance policies at the same time, but at the same time – it’s usually not advisable.
In most cases, the best thing you can do is take out an insurance policy while you’re still young and healthy and reap the benefits once your back starts aching.