Want to ensure that your loved ones are cared for after you are gone? Of course, you do! Securing life insurance coverage is the best way to ensure that your family is not riddled with financial burdens after you have passed. But simply having a policy is not enough to assure peace of mind. Your policy must be extensive enough to cover all final expenses, debts, and living expenses for those who currently depend on you financially.
But, as is the case with everyone, you do not know the day or the hour when you will pass. It can be difficult to plan for an event that is so unpredictable. But the worst thing you could do is to ignore it. You have options for your planning. It is possible to set multiple plans in place so that whether calamity strikes soon, or hopefully you pass many many years from now, the people who love and depend on you are taken care of when you are gone.
One such option is buying multiple life insurance policies. Though not everyone knows how to do this correctly or even that it is possible.
Below are the answers to some questions about having multiple life insurance policies and when it is a good idea.
Is There a Limit to How Many Policies I Can Have?
It is possible to carry multiple life insurance policies. But is there a limit to how many you can have? Not officially. There aren’t any laws that prohibit you from carrying as many life insurance policies as you can find. But that doesn’t mean it is possible or a good idea. For starters, you can only carry the amount of life insurance that you can afford. Each month you must make a premium payment to your life insurance company, therefore if you have multiple policies, that is multiple premiums. You are a risk to insure if your premiums are more than your budget affords. To prevent this, most insurance companies will cap your total amount of coverage limit to 25 times your annual income. So while there may not be an official limit to how many policies you carry, there is a limit to the amount for which you can be insured.
Can I Carry Policies With Multiple Companies?
While it is possible to carry policies with multiple companies, it may not be the wisest choice. Most insurance agents use the same database, therefore each can see how many policies you have applied for and which companies have accepted or denied you. If a company believes you are trying to overinsure yourself, your application will likely be denied. If you wish to purchase additional life insurance, it is always best to first speak with your current carrier to see if you can add a new policy or increase your current policy with additional coverage.
When Should I Consider Carrying Multiple Policies?
Not everyone needs to carry multiple policies. It can be more costly than the value you receive. But certain circumstances in life may warrant carrying more than one policy at a time.
Life Events
When reaching major life events such as getting married, having a baby, buying a house, or starting a small business, it is a smart idea to conduct a life insurance policy review.
Any event that increases your financial responsibility also increases your life insurance needs. But increasing current life insurance coverage, especially if you carry a permanent life insurance policy, can greatly increase your premiums. Buying an additional term policy to cover new large expenses might be a more affordable way to remain properly insured.
Long Term Care
When planning for the future, it’s not only smart to consider your loved ones when you are gone, but you must also think of their well-being and your own as you age. Life insurance policies are designed to cover financial responsibility after someone has passed, and especially if they pass young, but what happens if you live for a long time? Is that money wasted? Not if you plan correctly.
Carrying an insurance policy that includes a long-term care rider allows you to use the death benefit to pay for your care as you age. If you find yourself needing in-home nursing, you can use your life insurance policy to cover that cost while you are still alive. Additionally, if you do not use the full amount of the policy, or if you do not need long-term care, your beneficiaries will still receive the remainder of the death benefit upon your passing.
Financial Planning
Many people who desire to make smart financial planning decisions employ a strategy known in the insurance business as the ladder strategy. This strategy operates on the premise that you carry more financial responsibility and risk when you are younger, and as you age, those responsibilities decrease. Therefore you can save on premium costs by buying multiple policies in varying term lengths.
This looks like having high coverage for 10 years, medium coverage for 20 years, and a lower coverage policy that extends for 30 years. When doing this, you are insured for your younger years when you have a higher mortgage and childcare costs, but you are not paying high premiums later when your children are grown and your debts are paid off. Comparing this strategy against a high coverage policy for 30 years may save you money in the long run.
Are There Alternatives to Carrying Multiple Policies?
Buying a new or additional life insurance policy is not always the best or most cost-saving option. Depending on the company you insure with, you may have alternative options. For instance, some policies may include a guaranteed insurability rider which gives you the option to increase your coverage without undergoing another medical exam. This is beneficial to you because you can increase or decrease your coverage regardless of your health. It is important to note that though your health may not affect your premium with this rider, your age will still determine your premiums when changes are made.
Another alternative is by carrying a term life insurance policy with a term conversion rider. This rider allows you to convert your entire term policy, or portions of your policy, into permanent life insurance. Each company has its own policy for how to convert or time limits and deadlines on when you must make a conversion choice.
Are Multiple Policies Right for You?
Have you recently experienced a major life event? Or perhaps you aren’t sure of the terms of your current life insurance policy and that troubles you. Conducting a life insurance review is a smart way to ensure that your financial responsibilities are taken care of. It is also the most satisfactory way to give you peace of mind.
If you believe your circumstances or position in life warrants carrying multiple life insurance policies, you should speak to an insurance agent right away. Our agents at Gebhardt Insurance Group are experts at assessing your state of affairs and advising you on the best policy configuration for you specifically. Don’t find yourself underinsured, or buying additional policies you do not need, call to speak to a member of the Gebhardt team today.