Owning more than one Life Insurance Policy

Several persons have more than one life insurance policy for one reason or another. You can even have a life insurance portfolio comprising policies from different insurers. Naturally, there are merits and demerits to this.

The life insurance market comprises a variety of life insurance plans. To access the different benefits of those, having multiple policies is sometimes necessary. For example, one life plan may be cheaper but the other offers valuable optional supplementary benefits (for e.g., critical illness). If you do not wish to forego either benefit, you can obtain the merits of both by diversifying your life insurance portfolio.

You may have different reasons for purchasing a life insurance plan and multiple policies may suit different needs as well. A good reason for this is that some policies are assigned to others- like mortgage lenders and banks. You may not want a plan that is used for mortgage protection to interfere with family protection. In such cases, it is defensible and even sensible to have a different insurance plans.

Owning more than one policy is unavoidable if you purchase insurance on the life of someone with whom you have an insurable interest. A life insurance contract can have three different parties: a policy owner, insured and policy payer. If you purchase a policy for an unemployed spouse and designate yourself as owner, you will own more than one life insurance policy naturally. In any event, life insurers usually require those purchasing insurance on the lives of other to have sufficient insurance themselves (unless they are uninsurable).

Owning life insurance contract with different insurers has an added benefit. Life insurance companies can experience financial difficulties from time to time. Even the strictest regulation may not be enough to prevent the failure of an insurer. If one insurer fails or flounders, you know that you have another life policy that you can fall back on.

With an amalgamated policy, the premium rate is marginally lower because of the higher coverage amount. Insurers reduce premium rates based on coverage bands. Therefore, splitting coverage may deny you the opportunity to benefit from purchasing a single large policy.

Multiple life insurance policies may be inefficient if it is a result of poor life insurance needs estimation. Proper needs estimation will allow you to save money in the long-term by giving you a range of coverage that you would need for life. Without this, you would purchase policies each time that a different need comes up, even though you could have anticipated that need (e.g. family protection). Doing this would be inefficient since your premium rates rise with age and your insurability may change for the worse.

Generally, having more than one policy- even if with different insurers- is a fair idea. However, you must ensure that it is not a result of improper planning. Your life insurance portfolio must be consistent with your needs. If owning multiple policies suits your needs, then it would certainly be a great idea!