Can you have more than one life insurance policy?

At a glance

• You can purchase more than one life insurance policy – there are no legal limits to the number of policies you can hold.
• You may want to have more than one policy to suit different needs, to provide for different beneficiaries or simply to increase your level of cover.
• Though it may be worth reviewing your current life insurance instead of opting for an additional policy.

Having the right life insurance to suit your circumstances is essential, but what if those circumstances change? Perhaps you now own a home, have a higher paying job, have expanded your family, or find your health deteriorating.

All of these changes can have a significant impact on whether you feel your current life insurance policy is sufficient, and you may also find you have different needs that necessitate a different type of policy. So is it worthwhile taking out more than one? Below we explain how many life insurance policies you can hold, and whether reviewing your current level of cover is better instead.

Can you have multiple life insurance policies?

Yes, you can take out more than one life insurance policy if you think it’s necessary. There’s no legal limit to the number of plans you can hold, though bear in mind that providers may cap the level of cover they’re prepared to offer, and it’s important to make sure you’re not over-insured. If you try to take out several policies amounting to millions in cover when you’re on an average wage with a typical mortgage, insurers will likely push back!

So while there’s technically no maximum amount of insurance you can have, we can’t categorically say you can purchase as many life insurance policies as you wish. This applies whether you’re looking to take out life insurance with multiple providers or the same provider as your original policy.

Why might you have more than one life insurance policy?

There are several reasons you may want to have more than one life insurance policy. These can include:

• Your salary has increased. If you've received successive promotions since taking out your life insurance policy, you might find that your current level of cover is insufficient for your family’s new lifestyle. As such, it may be worth taking out an additional policy for a greater level of cover.
• You’re setting up a trust. If you've written your life insurance into a trust, and therefore earmarked it for a particular beneficiary, you could buy another life insurance policy for greater flexibility. It’s best to speak to a tax specialist to see if this is the best course of action; start by reading this guide on how trusts work, written by our preferred tax advisers Kellands Hale, or speak to them directly.
• Your mortgage has increased. If you’ve already got a life insurance policy to match your mortgage payments but later borrow more, you might decide to get a new policy that covers the additional amount.
• You want different policies for different purposes… You could, for example, have decreasing term life insurance or mortgage protection to purely pay off your mortgage, a level term policy to leave a lump sum for your beneficiaries, a third purely to cover funeral costs and even a fourth to provide an income for any dependents.
• … or different beneficiaries. If you want to avoid disagreements after you’ve gone, you could consider having separate policies for different beneficiaries.
• You’ve started a business. If you’ve started a business you may want to consider taking out an additional life insurance policy to protect it, though other kinds of insurance could be more appropriate (such as shareholder protection). Make sure to speak to an adviser in advance; you can contact our preferred partners Watts Mortgage and Wealth Management here.

Essentially, seeking more than one life insurance policy often comes down to the need for additional cover, often to reflect any lifestyle, financial or family changes. It’s important to work out the best way to achieve this.

Is it better to change your existing cover or take out a new policy?

In some situations, it might be easier and cheaper to update your policy with your existing provider. Remember, the older you become the risk you carry increases, which means your insurer will charge a higher premium. It’s always best to look at the total cost of updating your policy beside what it would cost to take out a new plan.

Therefore it’s important to see if your insurer can increase the limit of your current policy, as in some cases it can be the cheaper option. That’s why it’s best to speak to an independent financial adviser on what the best course of action is for you.

Should couples have separate or joint life insurance policies?

There’s no easy answer to this as it all depends on your circumstances and budget. Some couples like to opt for a joint life insurance policy to keep things simple and – often – cheaper, but the downside is that it only pays out once. Others may choose to have two single policies for greater flexibility.

But there’s always the option of having both kinds. A joint life insurance policy could be arranged so that it pays out on the death of the first partner, perhaps to pay off the mortgage, while the individual policy pays out a lump sum to other beneficiaries. Then, when the second partner dies, their own individual policy will pay out.

Can you have multiple policies with the same provider?

Yes. If you choose to opt for an additional policy rather than tweaking your original one, there’s technically nothing stopping you from setting up a new policy with your current provider. However, they’ll have internal thresholds as to the maximum they’re able to pay out to any one person, so you’ll need to keep within that amount.

Can you claim on two life insurance policies?

Yes. Provided the policies have been set up correctly, they’re still active on death and there’s nothing to suggest you invalidated the cover in any way, you can claim on two (or more) life insurance policies.

What to consider before taking out additional life insurance

There’s a lot to consider before taking out more cover, not least your budget and the impact additional policies will have on it. It’s important to think about not only the amount of cover you need, but how you want it to pay out – such as a lump sum or an income – and if it would be better to upgrade your current policy or take out a whole new one.

It can be difficult to decide this on your own, so if you’re unsure if multiple insurance policies are right for you, it’s best to get some advice. Our preferred life insurance brokers LifeSearch can help, giving you access to qualified insurance brokers who advise on a full range of products including life insurance, critical illness cover and income protection.

Learn more and get in touch with one of their advisers by clicking here.